Korea Investment Corporation

The Korea Investment Corporation (KIC, 한국투자공사/韓國投資公社), nation's sovereign wealth fund, was founded in July 2005 in accordance with the Korea Investment Corporation Act, in order to ensure the effective operation of foreign exchange reserves and public funds.

As of the end of 2010, the corporation’s paid-in capital totaled 100 billion won, wholly financed by the government.

Organization
The Steering Committee of the KIC deliberates on and resolves matters related to basic operational policy, medium and long-term investment policy, entrustment of assets, changes in financial status such as fluctuations in the amount of its capital, and related issues.

The committee is composed of no more than 12 members, including the CEO of the KIC, representatives of institutions with assets worth more than one trillion won entrusted to the KIC, and no more than six members from the private sector as nominated by the Civil Member Candidate Nomination Committee.

The chair of the committee is selected from among the private sector members. The Board of Directors, consisting of the President and the Executive Directors, resolves essential particulars regarding operations of the KIC.

Businesses
The KIC directs and administers assets entrusted by the government, the Bank of Korea, and a variety of public funds.

It is allowed to directly invest these entrusted assets in securities, foreign exchange, derivatives, domestic and foreign banking institutions, real estate and other venues, or re-entrust them to an external asset management company. In January 2012, KIC received the status of "qualified foreign institutional investor" (QFII) from the China Securities Regulatory Commission, which is allowed to directly invest in China's stock markets.

Profits from the management of the entrusted assets are returned to each entrusting institution, and a management commission rate is determined by mutual consent between the KIC and the entrusting institutions.

When the KIC signs a contract with an entrusting institution, terms restricting the purposes and methods of the entrusted assets may not be included. As to accounting, the entrusted assets must be accounted for separately from the assets of the KIC, as well as by the entrusting institutions.

Statistics
As of the end of 2010, total assets under KIC management amounted to roughly 37.5 billion dollars. Details of asset management by the KIC show that it had invested in traditional assets such as stocks and bonds, as well as in alternative assets such as products (energy resources and agricultural products), private equity funds, hedge funds and real estate.

As for the distribution of investment, bonds captured the largest portion at 45.9 percent, followed closely by stocks (41.8 percent) and trailed by other assets (1 percent). As an alternative investment instrument operated directly by the KIC and not entrusted to an external manager, the investment strategy has focused greatly on energy resources since 2010.

Criticism
According to the source of the National Assembly, KIC's performance is very poor in terms of return on investment (ROI) during the period of 2007-2011 compared with that of the National Pension Service (NPS, 국민연금공단/國民年金公團). KIC is under pressure to enhance the investment capacity and improve its ROI.

It was reported that KIC invested 89.2 percent of its assets in stocks and bonds, 46.1 percent of which consited of foreign investments. In comparison, NPS also put the lion's share of its financial fund into stocks and bonds, 10.2 percent of which consisted of foreign stocks and bonds.

Looking into the performance overseas, KIC made profit 4.64 percent of its investments compared with 6.98 percent of NPS. In 2011, KIC suffered 10.45 percent of loss in stocks portfolio compared with minus 5.73 percent of NPS. Considering the prudential investment style of NPS, KIC is called for intensifying the positive investment strategy.