2023 Annual Report

Investment Policy & Process

KIC’s investment policy and process focus on boosting long-term returns through the management of assets entrusted by the Korean government and Bank of Korea.

Investment Policy

Investment Objective

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 wealth.

Investment Principles

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.

Asset Classes

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, hedge funds and private debt.

Investment Guidelines

Investment guidelines are set by our sponsors and stipulate the key points to be followed during the investment process, including investment objectives, benchmarks, and risk tolerance. KIC manages assets and risk and evaluates performance based on these investment guidelines. KIC also has internal investment guidelines for individual funds within asset classes, such as equities and fixed income.

Asset Allocation

KIC allocates assets in consideration of the financial market environment, asset characteristics, and investment horizon, and we are strengthening our asset allocation role and functions. As part of our process, we hold an asset allocation forum every quarter to integrate top-down/bottom-up views among investment management groups and derive a house view.

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 KIC’s 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.

Direct and Indirect Management

KIC engages in direct management, trading directly in the financial markets, and indirect management, selecting external managers and entrusting them with funds. Direct management seeks stable returns with relatively low risk and marginal excess returns compared to the benchmark.

Indirect management uses a more active investment strategy that pursues high excess returns with relatively greater risk.

Risk Management

KIC minimizes unnecessary risk and controls downside risk through preemptive and systematic risk management.

We 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.

Investment Process

KIC’s investment process is focused on improving long-term returns through stable asset management.

Investment Committee

KIC has established and is operating the following investment-related committees to make prudent and responsible investment decisions.

Investment Philosophy