South Korea continues to expand into alternatives

In Preqin First Close last month, we cast an eye on South Korea’s institutional and corporate investors, with insights from Preqin’s Data Drop on the subject. 

Here, we take a second look, diving deeper into South Korea LPs’ positive sentiment, their continued focus on global markets, and how they’re looking closer to home for some opportunities. 

A greater stake in alternatives 

Two of South Korea’s institutional heavyweights – the National Pension Service (NPS) and the Korea Investment Corporation (KIC) – announced their 2024 returns earlier this year. 

The NPS posted its highest-ever annual investment return at 15%, with total AUM rising to $830bn at the end of 2024. Strong performance was driven by overseas assets, including alternatives, which yielded a return of 17%. 

Its fund size is projected to nearly double to $2.4tn by 2050. ‘The NPS has been trying to diversify investment portfolios and find fresh investment opportunities in partnership with global management firms,’ said CEO Kim Tae-hyun. 

Meanwhile, the KIC has continued to expand into alternatives. Posting its 2024 returns, the sovereign wealth fund said 21.9% of total assets were invested in alternatives, a $3.5bn increase from the previous year.  

‘Market sentiment today is mixed, with optimism about AI-led productivity growth and worries over geo-economic uncertainties co-existing,’ said KIC’s CEO, Il Young Park. ‘We will continue to build a well-diversified and sound portfolio…by exploring opportunities across asset classes where structural growth is expected.’ 

This growing appetite for alternatives is reflected in analysis by Preqin’s East Asia LP Research Team. 

As of December 2024, 49% of South Korea LPs planned to invest in private equity (including VC) in the year ahead, compared with 36% in the wider APAC region and 44% globally (Fig. 1). As interest rates declined in Q3 2024 and liquidity issues eased, more of the country’s LPs were looking to invest in small and mid-market buyout funds, particularly in North America. 

Fig. 1: Proportion of South Korea LPs planning to invest in private equity and VC

_{Source: Preqin Pro. Data as of December 2024}

It’s a similar story for private debt, with 47% of South Korea LPs having firm plans, compared with 31% of APAC and 38% of global investors. According to the analysis, senior debt direct lending alone will no longer provide the stable, high yields it once did, prompting investors to diversify their debt strategies. 

APAC partnerships drive further opportunities 

Aside from direct investment into funds, some recent national-level meetings signal how South Korea’s investors are turning to neighboring countries for deals. 

Last month, the 2025 IGNITE Thailand-Korea Business Forum took place in Seoul. Business leaders and government representatives from both countries discussed Thailand’s new initiative to become a global financial hub. Digital finance, upstream electronics, EVs, bio-based products, and national infrastructure projects were among the areas explored. 

South Korea’s investment in another APAC neighbor, Vietnam, is also expected to grow. Park Bong Kyu, Chairman of the Korea CEO Summit, reportedly told CICON Vietnam 2025, held in Hanoi in April, that investment in the country is expected to exceed $100bn within the next three years, up from $87bn in 2024. 

‘South Korea brings capital, technology, and valuable economic development experience, while Vietnam offers abundant resources, a skilled and cost-effective workforce, and a promising consumer market,’ said Park. 

At the same time, South Korea’s LPs have increasingly been targeting APAC, notably India and Australia. 

In February, for instance, Seoul-based confectionery company Lotte Wellfood announced plans to invest $300mn in India over the next 3–5 years, focusing on strengthening manufacturing capabilities and expanding the supply chain to access India’s consumers.

Data on regional preferences 

The East Asia Research Team’s analysis also informs this. It reveals that South Korea LPs – and those in the wider region – were looking to diversify their private equity investments within APAC. 

As of December 2024, 66% of South Korea LPs were more inclined to invest in private equity in their region than in North America (43%) and Europe (32%) (Fig. 2). It was a similar picture for investors based in APAC more widely. 

Fig. 2: Regions targeted for private equity by APAC and South Korea LPs 

_{*South Korea-based LPs investing in funds with a global focus rather than a regional focus  
Source: Preqin Pro. Data as of December 2024}

However, when it comes to private debt, South Korea LPs had a stronger preference for North America and Europe-focused funds than their APAC counterparts: 64% were targeting North America and 48% Europe, compared with 51% and 35% of investors in the wider APAC region, respectively (Fig. 3). 

The analysis suggests that with macroeconomic conditions becoming more complex, South Korea LPs remain conservative in their selection of private debt managers. 

Fig. 3: Regions targeted for private debt by APAC and South Korea LPs

_{*South Korea-based LPs investing in funds with a global focus rather than a regional focus
Source: Preqin Pro. Data as of December 2024}

In real estate, they stayed closer to home, with 66% favoring APAC, while just over 40% were looking at North America and Europe. Among APAC investors, 74% preferred their region, compared with North America (33%) and Europe (28%). 

Investors are likely drawn to Japan’s ultra-low interest rate policy, the high demand for student accommodation and rental housing in Australia, and India’s ambitious urbanization projects. 

In infrastructure, South Korea LPs have traditionally invested in Europe and North America, but now seek more geographic diversification. Some 62% of the country’s LPs were targeting their region, compared with North America (55%) and Europe (52%). There was particular interest in Australia and India.  

The gap is wider among investors across APAC, with 65% looking to their region, markedly higher than North America (39%) and Europe (33%). 

Read the Data Drop here: South Korea 2025: Investor trends

Special thanks to Hangyul Kim and Jack Jun from Preqin’s East Asia LP Research Team, who produced the analysis. 

Rupert Gilbey is Senior Content Editor at Preqin, a part of BlackRock.

Second look is edited by Libby Fennessy, Production Editor of Preqin First Close.

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_{The opinions and facts included in the above do not constitute investment advice. Professional advice should be sought before making any investment or other decisions. Preqin accepts no liability for any decisions taken in relation to the above.}