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KIC’s investment policy and processes focus on boosting long-term returns through the stable management of assets entrusted by the Korean government, Bank of Korea and public funds.
KIC’s investment objective is to generate sustainable 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 is strengthening the role and function of asset allocation in consideration of financial market conditions, the characteristics of each asset class, investment horizon and other factors to achieve its investment objective. We hold an asset allocation forum every quarter to integrate 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.
Strategic asset allocation
Strategic tilting
Tactical asset allocation
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.
KIC minimizes unnecessary risk and controls downside risk through preemptive and systematic risk management.
We also set risk limits in accordance with a risk management policy approved by the Steering Committee, KIC’s highest decision-making body, and regularly check compliance with these limits.
The following investment-related committees at KIC ensure prudent and responsible investment decision-making.
KIC’s investment process is focused on improving long-term investment returns based on stable asset management.
Set long-term investment goals to preserve and increase the value of sovereign wealth
Carry out mid- and long-term macroeconomic research
Discover and analyze new asset classes
Analyze capital market expectations for each asset class
Analyze the risk-return profile and investment constraints for each sponsor
Set optimal asset allocation rules to improve long-term returns
Analyze and forecast mid- and short-term financial markets
Establish mid-term and annual management plans based on the economic outlook and financial market forecast
Execute an asset allocation strategy based on house views decided at quarterly asset allocation forums
Preemptively analyze risks according to financial market circumstances and reflect them in the overall portfolio
Establish and implement investment strategies within risk limits for each asset class and fund investment
Analyze ex-post risks and performance factors for the entire portfolio and individual investments
Correct setbacks and reflect improvements based on performance and process monitoring
