S. Korean Gov't to Entrust Additional $5 bn to KIC

South Korea's sovereign fund is expected to exceed $50 billion in the near term.

As the Korean government entrusted another $5 billion to the Korea Investment Corporation (KIC), the total amount of asset managed by the KIC grew to $43.5 billion. Adding to that, the Bank of Korea (BOK) and the government plan to entrust an additional $3 billion and $5 billion, respectively, within the year. This will make the country's sovereign fund reach $51.5 billion by the end of the year, raising Korea's status in the global rankings of sovereign funds from 18th to 15th.

"The government signed a contract with the KIC to entrust $5 billion on March 18th," an official from the Ministry of Strategy and Finance (MOSF) said on Sunday. "$3.1 billion will be initially invested into stocks and bonds, and the rest $1.9 billion will be entrusted later for strategic investment in private equity funds or real estates." Korea's sovereign fund reached $38.5 billion as of the end of February, including $33.9 billion in investment and $4.6 billion in earnings.

The KIC is currently making real attempts to increase investments amid intensifying competition amongst sovereign funds in the global financial market.

However, the country's software for investment remains underdeveloped despite the expanding size of its sovereign fund. This is because the bill that the government submitted to the National Assembly to diversify investment is still pending there for two years. As a result, calls for deregulation of investment are growing in the country, witnessing that many other countries achieve high profitability through diversification of sovereign fund investment.

The government's plan is to allow the KIC to make diverse investments in domestic businesses and financial products. The government submitted a bill to reform the Korea Investment Corporation law in February 2009, but it hasn't been introduced to the National Assembly yet.

[Written by Hyuk-hoon Chung - Su-hyun Song] [ⓒ Maeil Business Newspaper & mk.co.kr, All rights reserved]