'Sovereign Wealth Fund + KIC'...Moving Toward the Singapore Model [Why&Next]

KIC Faces Limits in High-Risk, High-Return Investments
Focuses on Overseas Investments, Restricts Domestic Strategic Industry Investment
Korean-Style Sovereign Wealth Fund to Be Established
Aims for Active Investment in Advanced Industries,

The government will benchmark Singapore's two-track sovereign wealth fund management model, which is divided between Temasek and the Government of Singapore Investment Corporation (GIC), to establish a new Korean-style sovereign wealth fund separate from the existing Korea Investment Corporation (KIC). As KIC, which is entrusted with managing foreign exchange reserves for overseas investment only, plays a role similar to GIC, the new sovereign wealth fund aims to actively generate investment returns by investing in both domestic and international industries and assets, similar to Temasek.

Deputy Prime Minister and Minister of Economy and Finance Koo Yuncheol is delivering opening remarks at a post-briefing related to the '2026 Ministry of Economy and Finance Work Report' held at the Government Complex Sejong on December 11. / Ministry of Economy and Finance

On December 11, Deputy Prime Minister and Minister of Economy and Finance Koo Yuncheol explained the rationale behind the government's push to establish a 'Korean-style sovereign wealth fund' during a briefing at the Government Complex Sejong following a presidential work report. The government's move to establish this fund stems from the recognition that the current sovereign wealth fund system, which is tied to the stable management of foreign exchange reserves, has limitations, and that there is a need to create more proactive means of generating national wealth. The idea is to implement a Korean version of a model that maximizes investment returns through active asset management to build wealth for future generations, as seen with Singapore's Temasek or Australia's Future Fund.

Currently, the only sovereign wealth fund in Korea is KIC. Because KIC operates with entrusted foreign exchange reserves, it is required to deliver stable returns. This imposes restrictions on aggressive, high-risk, high-return investments to grow the nation's wealth. Furthermore, under the Korea Investment Corporation Act, KIC is limited to managing entrusted assets as foreign currency-denominated assets overseas, effectively blocking investment in domestic strategic industries. This is why there have been calls in the National Assembly to expand KIC's role to include investment in domestic strategic industries. Deputy Prime Minister Koo explained, "Since KIC must manage foreign exchange reserves, it cannot proactively generate national wealth."

Benchmarking the Singapore Model

Singapore, which the government has presented as a benchmarking target, operates GIC and Temasek, each with distinct investment strategies. GIC, like KIC, is a traditional sovereign wealth fund that manages the country's foreign exchange reserves, focusing on preserving asset value and stable returns, and invests exclusively overseas. In Korea, GIC acquired landmark buildings such as Gangnam Finance Center (GFC) and Seoul Finance Center (SFC) in the early 2000s and invested in Toss in 2018.

Temasek is an investment company established based on government-owned assets and stakes in public enterprises. It plays a role in growing national wealth through aggressive investments, including mergers and acquisitions (M&A), equity, and real estate investments. Temasek not only participates in the management strategies of key domestic companies such as Singapore Airlines as a major shareholder, but also absorbs returns from growth industries through global investments in companies like Visa, Mastercard, and Tencent. Among Korean companies, it has invested in Celltrion.

According to the website of the Government of Singapore Investment Corporation, Singapore has three overseas investment institutions: Temasek, GIC, and the Monetary Authority of Singapore (MAS, which serves as both the central bank and financial regulator). The Net Investment Returns Contribution (NIRC) from these institutions is estimated to reach 27.2 billion dollars in the 2025 fiscal year. These earnings are used by the government for long-term investments in education, research and development (R&D), health, and environmental improvement.

KIC Is Established, Now a Sovereign Wealth Fund for Temasek's Role

The Korean-style sovereign wealth fund envisioned by the government is focused on fulfilling the role of Temasek. While KIC continues to deliver stable returns through the management of foreign exchange reserves, the new sovereign wealth fund will serve as a channel for more active investment in promising industries both at home and abroad. The initial focus is expected to be on domestic investment. Deputy Prime Minister Koo stated, "To proactively generate national wealth, we must be able to invest wherever higher returns are possible, whether in real estate, advanced industries, or bio sectors. We will invest in domestic ventures and, if there are good companies overseas, we will consider M&A in advance to create national wealth." Vice Minister Kang Giryong added, "We are considering domestic investment in strategic sectors."

The specific funding scale for the Korean-style sovereign wealth fund is still under review. For now, unlisted shares held by the government through the inheritance tax payment-in-kind system are being considered. Deputy Prime Minister Koo noted, "Temasek in Singapore also started very small, with about 200 million dollars, and has now grown to 320 billion dollars. Rather than securing massive resources from the outset, we will allow stocks received in kind to serve as funding." He added, "Once these assets are incorporated into the sovereign wealth fund, they will not be simply sold off; if necessary, we can acquire more or sell with management rights attached." Vice Minister Kang explained, "We are gathering ideas while considering stable funding sources and the impact on public finances."

The government expects a virtuous cycle of national wealth creation. Even if the fund starts with limited resources, the plan is to increase corporate value through active investment in promising domestic venture companies or highly profitable strategic industries, and in the long term, to expand into investments in promising overseas companies and real estate. The strategy is to reinvest accumulated returns in future industries, thereby expanding the size of the fund over time.