DEFINITION of 'Korea Investment Corporation'

The Korea Investment Corporation (KIC) is a government-owned investment organization that manages the sovereign wealth fund for the Government of South Korea. The KIC was established by law in 2005. The KIC received initial deposits of $17 billion from the Bank of Korea and $3 billion from the Korean Ministry of Strategy and Finance. The KIC has approximately USD$122.3 billion in assets under management as of the end of 2018, according to the Sovereign Wealth Fund Institute's rankings.

BREAKING DOWN 'Korea Investment Corporation'

The KIC is restricted to investing only in assets which fall under the guidelines provided by the Korea Investment Corporation Act. The KIC's objectives are to enhance Korea's sovereign wealth and to contribute to the development of the Korean financial industry. The KIC is governed by a steering committee consisting of nine members plus the chairman.

KIC Investments

The fund invests in equities, fixed income, hedge funds, private equity, and real estate and infrastructure. KIC’s return on total assets in 2016 stood at 4.35%, with a five-year annualized return of 5.11% and annualized returns since inception of 3.34%, the fund reported. Regarding its investment philosophy, KIC said this: "KIC strives to increase returns while (1) minimizing the risks from individual markets and assets through portfolio diversification; and (2) exercising flexibility to seize investment opportunities.

Our investments started with traditional asset classes, including stocks and bonds. We broadened our investment scope to include inflation-linked bonds and commodities as well as private equity, real estate, hedge funds and individual investments. As part of our portfolio diversification, we have also increased our exposure to emerging markets since 2010.

Decisions related to strategic asset allocation are subject to deliberation by the Steering Committee. The investment management agreements signed between KIC and sponsors specify available asset classes and benchmark targets, and they serve as the basis for risk management and performance evaluation. KIC pursues benchmark returns (beta) by diversifying investments in the range of currencies and countries, as outlined in its investment management guidelines. We also strive to generate excess return over the benchmarks (alpha) through active management within an appropriate level of risk.

Regarding traditional assets, we manage risk using the ex-ante tracking error from active investing relative to the benchmark. If the weighting of an asset class deviates from a set range relative to the benchmark, adjustments are made so that exposure falls within the set range. The portfolio is rebalanced at pre-determined times to maintain policy weightings for each asset class."

RELATED TERMS
  1. Asset Mix

    Asset mix is the breakdown of all assets within a fund or portfolio. ...
  2. Sovereign Risk

    Sovereign risk is the risk that a central bank will impose foreign ...
  3. Portfolio Management

    Portfolio Management involves deciding investment mix and policy, ...
  4. Benchmark

    A benchmark is a standard against which the performance of a ...
  5. Sovereign Bond Yield

    Sovereign bond yield is the interest rate paid on a government ...
  6. Risk Management

    Risk management occurs anytime an investor or fund manager analyzes ...
Related Articles
  1. Investing

    5 Largest Sovereign Wealth Funds

    Oil-rich Norway tops the list of the largest sovereign wealth funds in the world.
  2. Insights

    Economic Consequences of Korean Reunification

    Relaxing tensions between North and South Korea have people wondering what Korean unification would mean for the global economy.
  3. Investing

    Emerging Markets: Analyzing South Korea's GDP

    South Korea's transition from a war-devastated poor country to an affluent developed nation presents a phenomenal growth story.
  4. Investing

    Following Buffett Into South Korea

    At Berkshire's annual meeting, Warren Buffett highlighted South Korea as an attractive market. We examine some key players.
  5. Investing

    The Risks Of Sovereign Bonds

    Sovereign debt can play an important role in providing international diversification to individual investors.
  6. Tech

    South Korea May Tax Cryptocurrency Trades

    The country has one million daily traders of cryptocurrencies and accounts for a major chunk of overall trading volumes.
  7. Tech

    Why South Korean Bitcoin Price Is $1,000 Over Global Price

    Surging trade volume among South Korean Bitcoin exchanges has pushed prices $1000 higher than the global average.
  8. Investing

    BNDX: Vanguard Total International Bond ETF

    Learn about the Vanguard Total International Bond exchange-traded fund, which invests in investment-grade foreign, sovereign and corporate bonds.
  9. Investing

    Top 4 International Treasury Bond ETFs (BWX, EMB)

    Learn about the top four international treasury bond funds that hold sovereign foreign bonds, which can be denominated in U.S. dollars and local currencies.
  10. Insights

    Axis and Allies: US And EU Sanctions Against North Korea

    A look at the sanctions imposed by United States and the European Union on North Korea, along with their effectiveness.
RELATED FAQS
  1. Which asset classes are the most risky?

    Understand why equities and real estate are the two riskiest asset classes – even though they also provide the greatest potential ... Read Answer >>
Trading Center