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  • Investment Philosophy & Policy


Investing assets entrusted by the government, Bank of Korea and public funds in the global financial market

Investment Philosophy & Policy

Investment Philosophy

Investing with a long-term perspective

Through long-term investing, KIC pursues returns that are consistently high and stable amid short-term market volatility.

Investing based on intrinsic value

KIC discovers undervalued assets through systematic valuation.

We believe

  • Long-term investment can generate better returns than short-term investment.
  • Asset allocation is the most important factor in determining a portfolio’s absolute return.
  • Diversified investment is an effective way to achieve a high risk-return ratio.
  • There is a premium for investing in risky or illiquid assets.
  • The stock market is inherently inefficient.
  • Research-based value investing can generate excess returns in light of market inefficiency.
  • External asset managers that have a solid investment philosophy and stick to the basics by sector can generate stable returns amid external volatility.
  • System-based operations can lead to effective asset management and improve long-term investment performance.
  • Strong teamwork and transparent, sound governance are essential for generating sustainable investment returns.
  • Effective management of expenses and controls are essential for increasing net added value.

Investment Policy

Adhering to principles of prudent and responsible investment, KIC strives to increase returns while (1) minimizing the risks from individual markets and assets through portfolio diversification; and (2) exercising flexibility to seize investment opportunities.

KIC signed investment management agreements with the Bank of Korea and the Ministry of Economy and Finance in June and October of 2006, respectively. We began investing the entrusted assets in November of the same year, and finished building our portfolio using the initially entrusted USD 20 billion in June of 2008.

Our investments started with traditional asset classes, including stocks and bonds. We broadened our investment scope to include inflation-linked bonds and commodities as well as private equity, real estate, hedge funds and special investments. As part of our portfolio diversification, we have also increased our exposure to emerging markets since 2010.

Decisions related to strategic asset allocation are subject to deliberation by the Steering Committee. The investment management agreements signed between KIC and sponsors specify eligible asset classes and benchmark targets, and they serve as the basis for risk management and performance evaluation.

KIC pursues benchmark returns (beta) by diversifying investments in the range of currencies and countries, as set forth in its investment management guidelines. We also strive to generate excess return over the benchmarks (alpha) through active management within an appropriate level of risk.

Regarding traditional assets, we manage risk using the ex-ante tracking error from active investing relative to the benchmark. If the weighting of an asset class deviates from a set range relative to the benchmark, adjustments are made so that exposure falls within the set range. The portfolio is rebalanced at pre-determined times to maintain policy weightings for each asset class.