(January 18, 2012) — Scott Kalb, the chief investment officer of the $43 billion Korea Investment Corp (KIC), has said that despite the region’s sovereign debt crisis, there is opportunity in European assets.
In an interview with Bloomberg Businessweek, Kalb — whose term as investment head of the Korean sovereign wealth fund is set to end in April — noted that despite the sovereign debt crisis in Europe, assets in the region are “attractive.” At the same time, Kalb expressed his commitment to real estate, with the fund looking to buy more of the asset class.
“We just want to be in a position to buy those assets when attractive opportunities arise. We want to be ready to take advantage of it,” Kalb told the news service.
He added: “The real asset is an important part of the diversification of our portfolio. Real assets provide you with a steady, stable source of cash flow. It also provides you with some kind of inflation hedge, the protection from inflation.”
Kalb’s confidence in real estate follows a decision by the largest public pension fund in the United States — the California Public Employees’ Retirement System (CalPERS) — to approve a new program in August for emerging real estate managers who have less than $1 billion of assets under management. “The Emerging Manager Program is another positive step in restructuring the real estate portfolio. This program will give us several new features including clearly-defined program parameters to provide appropriate and necessary support for emerging managers,” said George Diehr, investment committee chair for CalPERS, in a statement.
Meanwhile, a report issued in August by Deloitte showed that commercial real estate deal flow and liquidity are going strong despite a sluggish economy. The firm’s “Commercial Real Estate Outlook: Top Five Issues in 2011” report revealed that capital availability, price discovery, and improved fundamentals — driven by alternative financing sources and loan restructuring — are fueling commercial real estate (CRE) recovery.
“This is a positive year for commercial real estate so far. The uncertainty impacting the overall economy and other industries has had less of an effect on the real estate industry,” said Bob O’Brien, vice chairman and real estate sector leader at Deloitte. “It’s important to remember that commercial real estate was the first sector to be hit hard by the downturn so it is further along in rebounding than other businesses. At the same time, the wall of debt maturity that will come due between now and 2015 still may present short and longer term challenges for the remainder of this year and into 2012.”
Read a pro and con assessment of real estate from aiCIO Magazine’s Winter 2011 Issue.