Korea Investment Corp. - Summary

May 12, 2013

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The South Korean government established the Korea Investment Corp. (KIC) in 2005. KIC manages funds assigned to it from the Ministry of Finance’s Foreign Exchange Stabilization Fund, the country’s central bank, Bank of Korea, and other public funds. KIC’s mandate is to invest its funds to preserve their value and encourage the development of Korea’s financial services sector. KIC is wholly-owned by the government of South Korea.

KIC started with a conservative mandate to invest in assets such as stocks and bonds through external asset managers and encourage them to locate in Seoul. It had yet to start managing its own equities when, in January 2008, it made a landmark $2 billion investment into troubled investment bank Merrill Lynch & Co. as part of a high-status investor group, which included fellow sovereign fund the Kuwait Investment Authority.

The losses resulting from the Merrill Lynch investment and the market turmoil of the financial crisis brought about huge changes at KIC, with the fund introducing a risk-oriented approach to portfolio strategy and reorganizing its investment departments. The fund brought much of its traditional asset management in-house, and built a new research center to provide independent market views for its portfolio management team.

In 2010, KIC started investing in emerging markets and launched a special investments program to build a portfolio of direct stakes in global companies, primarily engaged in commodity production. The fund has continued to diversify its holdings since, and aims to allocate around 50 percent of its portfolio to alternative assets by 2020.

KIC currently trades with more than 10 investment banks and brokerage houses and has issued separate investment mandates to more than 40 asset managers. A counterparty evaluation process is undertaken semi-annually, in which KIC looks at costs and benefits, service quality and market research.

As of December 31, 2016, KIC managed assets of $110.8 billion, up 20.7 percent from the $91.8 billion figure recorded for end-2015.

KIC is a signatory to the Santiago Principles and a member of the International Forum of Sovereign Wealth Funds.

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