World Bank Nabs Korea's Sovereign Fund CIO

The World Bank has appointed Heung-sik Choo, outgoing CIO of the Korea Investment Corporation (KIC), as director of its investment management division, the bank confirmed Wednesday.

Choo took over the $91.8 billion Korean sovereign wealth fund in March 2014, becoming the fund’s fourth leader since it launched in 2005. He replaced ex-CIO Dong-ik Lee, who quit mid-term in January 2013.

In February of this year, Choo announced his intention to resign from KIC as soon as a successor could be found, though a replacement has yet to be announced.

His announcement came just months after KIC Chairman Hongchul Ahn departed the fund in November, a year before his term was due to end.

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At the World Bank, Choo will be responsible for overseeing $130 billion in assets for the bank’s lending arms, trust funds, investment guarantee agency, and clients.

Choo has previously served in separate roles as CIO and head of reserves at the Bank of Korea.

A greater portion of hedge funds (78%) say they’re open to cutting fees than investors report even asking for better terms (63%), according to a major BNY Mellon survey.

Private equity once again came out as the favored alternatives strategy, accounting for 37% of unlisted allocations to hedge funds’ 14%. Appetite for future investments wasn’t any stronger.

To lure back apathetic allocators, the vast majority of hedge fund respondents said they want to meet investors at the negotiating table. Whether institutions will take them up on that offer remained an open question.

“It feels as though 1.5% is the new 2% in fees,” said Robert Chambers, BNY Mellon’s head of global product management. “As new ways of accessing the market, such as liquid alternatives, gain traction, there is increasing compression on fee levels.”

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The ‘black box’ days have ended too, with three-quarters of general partners considering increased portfolio transparency to render themselves more attractive.

BNY Mellon Hedge Funds Source: BNY Mellon, “Split Decisions” Investors broadly reported satisfaction with the client service and returns they have received from hedge funds, despite years of relatively weak performance by the sector. Only 6% of the respondents told BNY they were unhappy with either category.

The results painted a challenging picture for hedge funds looking to raise capital.

Three-quarters of investors said they plan to retain or shrink their average 14% allocation to hedge funds over the next year, making it the least popular alternatives category.

Private equity firms, in contrast, could expect ever more inflows, with 51% of investors planning to grow their average 37% allocations. While hedge funds were willing to bend over backwards to attract limited partners, investors said they want that flexibility more from their private equity partners.

“The private equity industry has huge growth potential,” said one investment director, “but this is dampened due to unreasonable fees.”