2024 Annual Report
Investment Highlights
Investments
Governance & Organization
Traditional Assets
Traditional assets make up the core of KIC’s investment
portfolio and consist of equities, fixed income and asset
allocation. They play a pivotal role in achieving KIC’s
investment objectives.
Since initiating fixed-income investments in 2006, KIC has expanded the scale of its portfolio through diversifying into a broad range of asset classes, including equities and absolute return assets, and the development of new strategies.
As of 2024, traditional assets account for 78.1% of KIC’s total portfolio and have delivered stable performance, with an annualized return of 4.89% since inception. As KIC’s investment scope and scale have steadily grown, it has strengthened its ability to adjust allocations across asset classes and manage risk companywide. Since 2019, KIC has convened quarterly asset allocation forums, attended by investment management experts, to engage in in-depth discussions that inform investment decisions.
KIC derives expected returns for each asset class based on its financial market outlook and asset class analyses. It then determines optimal asset class weights considering companywide risk levels. KIC develops various relative strategies within asset classes and adjusts asset class weights in response to changes in economic conditions and financial market fluctuations to achieve returns exceeding benchmarks.
To enhance portfolio returns, KIC rebalances between asset classes, applies currency hedging strategies, manages appropriate proportions of direct and indirect investments, diversifies strategies within asset classes and entrusts assets across multiple management firms.
Macroeconomic Analysis
KIC analyzes global macroeconomic research from various perspectives to ensure effective asset allocation.
Through considering the economic structures and political and social issues of major countries, we lay the groundwork to actively respond to changes in the investment landscape. We use the analysis for shortterm market responses and to build our portfolio in the mid- and long-term.
Our regional managers also actively communicate and consult with one another, which allows for the mutual verification of investment ideas. We build a strategic portfolio based on the global economic and market outlook derived through this process, contributing to long-term returns.
Equities
KIC uses fundamental analysis and quantitative models to identify equities around the world that are undervalued relative to their intrinsic value with a long-term investment perspective. While focusing on generating excess returns in accordance with investment guidelines, we manage our portfolios in consideration of various risk factors, such as changes in the macroeconomic environment.
We pursue stable and sustainable returns through building a balanced portfolio of fundamental and quantitative strategies and of direct and external investments.
Fundamental Direct Investments
KIC’s fundamental direct investment strategy, led by the Equity Investment & Strategy Group and Global Equity Investment Group, aims to deliver stable excess returns through long-term investments in undervalued companies identified via rigorous intrinsic value analysis.
The strategy is structured into global and regional portfolios. Headquarters constructs global portfolios by evaluating the relative strengths of companies from a broad, international perspective while the New York and London offices apply region-specific expertise to implement localized strategies. The offices work in close coordination with headquarters to ensure a synergistic approach to global equity investments.
Quant Equity Management
The Quant Equity Investment Group’s long-term vision is to strengthen KIC’s direct investment capabilities. As such, it benchmarked advanced overseas systems and developed an in-house global portfolio management and trading system. The group began investing in 2008 with passive index-tracking strategies and has since fully implemented quantitative excess return models based on mathematical and statistical algorithms. These efforts have evolved into enhanced index strategies that aim to improve cost efficiency and returns.
To actively respond to changes in the global investment environment, the Quant Equity Investment Group leverages big data and machine learning technologies. It is also building an operational platform by strengthening ESG and thematic strategies. In addition, the group operates a quota program that delegates a portion of foreign equity trading to domestic securities firms, supporting mutual growth with Korea’s finance industry
External Equity Management
External equity investments, managed by the Equity Investment & Strategy Group, aim to generate longterm excess returns by selecting and diversifying investments across global asset managers with strong operational capabilities. The team in charge employs a range of investment techniques, including fundamental and quantitative approaches, and seeks to deliver consistent long-term performance by constructing balanced portfolios across regional strategies, including global developed markets and Asia, based on differentiated investment philosophies such as value, growth and stability.
Fixed Income
KIC invests in a wide range of fixed-income instruments, including government bonds, agency bonds, corporate bonds and asset-backed securities across countries and currencies. It pursues a balanced portfolio management approach combining bottom-up investing based on regional and sectoral expertise with topdown strategies grounded in comprehensive global market analysis, while effectively managing market, credit and liquidity risks. In addition, KIC actively capitalizes on diverse investment opportunities in the global fixed-income market by fostering the synergy created through seamless collaboration between our headquarters and overseas branches, as well as through an integrated approach to both direct and delegated asset management.
Direct Fixed-Income Investment
Our directly managed fixed-income portfolio is guided by a balanced integration of top-down and bottomup strategies, with a strong focus on active risk management to navigate market volatility and pursue excess returns. By leveraging deep sector expertise and maintaining close coordination between our headquarters and global offices, we effectively capture a wide range of opportunities across the global fixedincome landscape.
External Fixed-Income Management
For externally managed fixed-income portfolios, KIC seeks to generate stable mid- to long-term excess returns by selecting top-tier managers with strong alpha-generation capabilities in the global fixed-income market. We construct well-balanced portfolios and actively rebalance them in response to evolving global economic and market conditions.
Tactical Asset Allocation
KIC has established a process to formulate and implement tactical asset allocation strategies across its traditional asset portfolio. Tactical asset allocation aims to adjust asset class weights through spot allocation, hedging and alpha strategies in order to respond to short-term market volatility, manage overall return volatility across traditional assets and enhance returns.
To address heightened market volatility, KIC continues to develop quantitative indicators based on economic and market data analysis and constructs expected scenarios through various analyses of past financial crises and geopolitical events. Through these efforts, KIC seeks to strengthen its systematic framework for investment management and risk analysis within the traditional asset portfolio.
