Korea Investment Authority, South Korea's $35bn sovereign wealth fund, has reduced exposure to euro zone equity and fixed income investments and is now underweight on assets in the region, the fund's top official said today.

"We are very worried about what's going on in Europe. I don't think the austerity measures will be enough. I think they will have to do some debt rescheduling," said Scott Kalb, chief investment officer at the sovereign wealth fund known as KIC. Kalb spoke at a forum sponsored by The Korea Society.

However, the fund is not shorting the euro but trimming its investments in the region from what he thought was a substantial exposure.

The KIC official said Europe has "an artificial union" with Germany as the principal backer. "We're kind of shocked that Germany seems to have stepped away."

The Korean fund is also keen on boosting its position in alternative investments, mainly private equity, hedge funds, real estate, and natural resources. In private equity and hedge funds, KIC's main interest is in credit strategies and distressed assets. At the moment, the fund has roughly 8 percent allocated to alternative investments. Mr. Kalb said he plans to boost that allocation to 20 percent.