Investing assets entrusted by the government, Bank of Korea and public funds in the global financial market
The Korea Investment Corporation (KIC) was entrusted with USD 100 billion following its establishment in 2005, and has a net asset value of USD 134.1 billion as of the end of 2017.
Following a principle of diversification, we manage a portfolio that comprises 85.6% traditional assets and 14.4% alternative assets, including hedge funds, private equity, real estate and infrastructure.
With a strategy of gradually expanding our alternative assets, which have a low correlation with traditional assets and can capture illiquid risk premiums that tend to pursue relatively higher returns, we increased the proportion of alternative investments in our portfolio from 13.7% at the end of 2016 to 14.4% in 2017.
KIC’s return on total assets in 2017 reached 16.42%, with the annualized return for the past five years being 5.99%. We have expanded our investment competencies based on principles of long-term investing and diversification since our establishment and recorded an annualized return since inception of 4.45% despite the global financial crisis and low interest rates.
Thanks to the strong performance of equities markets in developed and emerging markets as well as stable interest rate patterns in global fixed-income markets in 2017, the MSCI All Country World Index (equities) soared by 23.97%, and the Barclays Capital Global Aggregate Index (fixed income) rose by 7.39%. The S&P GSCI Light Energy Total Return Index increased by 5.15%, as associated assets reported mixed performance.
(USD billion, %)
|Alternative assets||Hedge funds||4.7||3.5|
|Real estate and infrastructure||7.8||5.8|
KIC’s return on total assets in 2017 stood at 16.42%, with a five-year annualized return of 5.99% and annualized returns since inception of 4.45%.
The return on traditional aseets in 2017 is 16.71%, 129bps higher than the benchmark.
|Category||2013||2014||2015||2016||2017||Annualized return for the past five years||Annualized return since inception|
Annualized return since inception is 7.37%
* Total includes commodities (categorized as traditional assets since April 2011)
KIC fully divested from its special investment (Bank of America Merrill Lynch) in 2017. The final return was 0.38%.
(USD billion, %)
|Investment start date||Initial amount invested||Recovered amount||Accumulated gains||Annual return on investment*|
|Feb. 1, 2008||2.0||2.1||0.1||0.38|
* IRR basis
|Equities||Morgan Stanley Capital International All Country World Index ex Korea (unhedged)|
|Fixed income||Barclays Capital Global Aggregate Index ex KRW ex Korea (unhedged)|
|Commodities||S&P GSCI Light Energy Total Return Commodity Index|
|Inflation-linked bonds||Barclays Capital Global Inflation-linked Bond Index|
|Cash||BofA Merrill Lynch 3-Month US Treasury Bill|
|Private equity||Morgan Stanley Capital International All Country World Index ex Korea (unhedged) + 2%, 3 months lagged|
|Real estate and infrastructure||G7 inflation rate + 4%, 3 months lagged|
|Hedge funds||BofA Merrill Lynch 3-Month US Treasury Bill + 3.5%, 1 month lagged|