KIC’s investment objective is to generate consistent and stable investment returns within appropriate risk limits to preserve and increase the value of Korea’s sovereign wealth.

Based on principles of prudent and responsible investing, KIC diversifies investments across asset classes and regions, ensuring that overall portfolio risk remains within appropriate levels to increase returns in a sustainable manner.

KIC invests in traditional and alternative assets. Traditional assets include listed or highly liquid financial assets such as equities and fixed-income investments. Alternative assets, which can capture risk premiums associated with illiquid investments, include private equity, real estate, infrastructure and hedge funds.

The investment guidelines provided by our sponsors stipulate the objectives, benchmarks, risk tolerance limits and other key guidelines for mandated investments and serve as the basis for all investments, risk management and performance assessments at KIC. KIC has also established internal investment guidelines for all asset classes, including equity, fixed income and each fund type.

KIC establishes investment targets based on the nature and objective of assets and is strengthening the role and function of asset allocation based on the financial market environment, characteristics of each asset class and investment horizon. We hold an asset allocation forum every quarter to integrate the top-down and bottom-up views from various investment departments and formulate a house view to ensure a reliable asset allocation process.

KIC’s asset allocation system consists of strategic asset allocation, strategic tilting and tactical asset allocation, which are implemented according to investment horizon and role.

Strategic asset allocation defines the role and function of each asset class and sets the policy portfolio based on expected returns and risks on a long-term horizon. Strategic tilting aims to increase returns by adjusting asset allocation against the policy portfolio on a mid-term horizon. Tactical asset allocation pursues excess returns through using alpha strategies and managing risks via various hedging strategies in the event of short-term market volatility.

KIC manages traditional assets directly by trading in financial markets and indirectly through external managers.

For direct investments, we pursue stable returns with relatively low risk and marginal excess returns compared to the benchmark. For indirect investments, we use a more active investment strategy that pursues high excess returns with relatively greater risk.