Korea Investment Corporation

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Korea Investment Corporation (KIC): Overview, Strategy, and Key Facts

What is KIC?

The Korea Investment Corporation (KIC) is South Korea’s government-owned sovereign wealth fund manager. Established by law in 2005 and funded beginning in 2006, KIC invests national assets to increase long-term wealth and support development of the domestic financial industry. Initial capital came from the Bank of Korea ($17 billion) and the Ministry of Strategy and Finance ($3 billion).

Size and significance

  • Assets under management: approximately $183.1 billion (end of 2020).
  • Ranking: among the top 20 sovereign wealth funds globally.

Objectives

KIC’s primary goals are to:
* Preserve and grow national wealth over the long term.
* Contribute to the development and sophistication of Korea’s financial markets.
* Increase exposure to sustainable and socially responsible investments under its “sustainable growth vision” with targets through 2035.

Governance and legal framework

  • Operates under the Korea Investment Corporation Act, which defines permissible investments and governance rules.
  • Governed by a steering committee composed of a chair plus nine members, which evaluates strategic asset allocation and major policy decisions.
  • KIC is a distinct legal entity and is separate from Korea’s foreign exchange reserves.

Investment strategy and philosophy

  • Dual mandate: capture benchmark returns (beta) through broad diversification across currencies and countries, and seek excess returns (alpha) via active management within controlled risk limits.
  • Emphasis on portfolio diversification to minimize market- and asset-specific risk while retaining flexibility to exploit investment opportunities.
  • Strategic asset allocation decisions are reviewed by the steering committee; portfolio rebalancing is performed at predetermined intervals to maintain policy weights.

Portfolio composition

  • Traditional assets: ~85% (equities, bonds, money-market instruments).
  • Alternative assets: ~15% (private equity, real estate, infrastructure, hedge funds).
  • Since 2010, KIC has increased exposure to emerging markets to enhance diversification.

Risk management and performance measurement

  • Active risk is managed using ex‑ante tracking error relative to benchmarks.
  • Asset-class weightings are monitored against permitted ranges; deviations trigger adjustments to bring exposure back within policy ranges.
  • Agreements with external managers specify eligible asset classes and benchmark targets, forming the basis for risk control and performance evaluation.

Performance highlights

  • Return on total assets (2020): 13.7%.
  • Five-year annualized return (through 2020): 9.0%.
  • Annualized return since inception: ~5.22%.

Key takeaways

  • KIC is South Korea’s sovereign wealth fund manager, created to preserve and grow national assets while supporting the domestic financial sector.
  • The fund balances passive, benchmark-driven exposure with active management aimed at generating alpha, all subject to formal risk controls.
  • KIC is pursuing a long-term shift toward more sustainable and socially responsible investments, with goals extending to 2035.