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Sovereign wealth funds

Yoon admin to expand KIC's fund management base

The new government is pushing for the sovereign wealth fund to manage more retirement and mutual aid funds

By May 12, 2022 (Gmt+09:00)

3 Min read

New President Yoon Suk-yeol salutes during his inauguration ceremony on May 10 (Courtesy of Lee Jae-moon)
New President Yoon Suk-yeol salutes during his inauguration ceremony on May 10 (Courtesy of Lee Jae-moon)


South Korea's new president Yoon Suk-yeol, who took office on Tuesday, is set to push the expansion of sovereign wealth fund Korea Investment Corporation’s fund management role, according to the latest version of the national action plan drafted by the presidential transition committee. 

According to the plan, the new government will accelerate entrusting KIC with capital from some small-sized retirement funds and mutual aids, thus finding enhancing the profitability of overseas investments. This was described in "Advancing the Financial Market" part, a core national task of the plan.

KIC, managing $205 billion in assets as of the end-2021 wholly in overseas assets, has worked to be entrusted with local retirement and mutual aid funds for years. KIC has been in talks with the government and the Bank of Korea (BOK) about increasing entrusted assets in a bid to rank among the global top 10 sovereign wealth funds, CEO Jin Seoungho said in his interview in January.  
 
Founded in 2005, KIC leads overseas investment of Korean public funds. The world’s 14th-biggest sovereign wealth fund has been entrusted with $115.1 billion from the government and BOK as of the end-2020. It aims to enlarge its assets under management (AUM), however, the Korea Investment Corporation Act limits its role to the government, BOK and public pension funds.    

In efforts to expand its AUM, KIC has appealed to the National Assembly of Korea to revise the act as well as executed co-investments with local financial institutions via joint ventures. Last November, KIC, National Agricultural Cooperative Federation (NongHyup) and National Federation of Fisheries Cooperatives (Suhyup) signed an agreement to found a $300 million JV for co-investment in overseas hedge funds.  

If the new government revises the act, some small-sized retirement funds and mutual aids are expected to enlarge their overseas investments with low commissions.

“Most small-to-mid-sized retirement plans and mutual aids have a lack of fund management experience and professional investment pools. If they could entrust funds to KIC, they could save a considerable amount in fees,” a local retirement fund official said.  

However, some officials are skeptical that KIC will significantly increase the AUM with more funds from small institutional investors.

“The investment plans of some private institutional investors are different from those of the government and BOK. For example, under its policies, KIC hires local investment managers or global asset managers that have newly entered the Korean market. This may not meet the needs of private institutional investors,” a global asset manager source said.  

The six tasks of Advancing the Financial Market include rationalization of equity and other financial investment product taxes; eradication of illegal short-selling and improvement of the short-selling system; institutionalization of protecting shareholders at the time of corporate spin-offs; improving requirements for delisting and the delisting process; restrictions on corporate insider’s selling of company shares; enhancement of transparency and fairness of the capital market; and the advancement of the foreign-exchange market and improvement of overseas investment, which covers the KIC portion.

Write to Tae-Ho Lee at thlee@hankyung.com
Jihyun Kim edited this article.
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