'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, Bio, and Real Estate

The government plans to establish a Korean-style sovereign wealth fund, separate from the existing Korea Investment Corporation (KIC), by benchmarking Singapore's dual-track sovereign wealth management model, which is divided between Temasek and GIC (Government of Singapore Investment Corporation). Since the 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, much like Temasek.

Koo Yoon-chul, Deputy Prime Minister and Minister of Economy and Finance, 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, Koo Yoonchul, Deputy Prime Minister and Minister of Economy and Finance, explained the background for the government's push to establish a "Korean-style sovereign wealth fund" during a briefing following the presidential work report at the Government Complex Sejong. The government's initiative to establish a Korean-style sovereign wealth fund stems from the recognition that there is a need to overcome the limitations of the current sovereign wealth fund system, which is tied to the stable management of foreign exchange reserves, and to secure a more proactive means of national wealth creation. The idea is to implement a Korean version of the model seen in Singapore's Temasek or Australia's Future Fund, which maximizes investment returns through active asset management to build wealth for future generations.

Currently, the only sovereign wealth fund in Korea is the Korea Investment Corporation (KIC). Because KIC is structured to manage entrusted foreign exchange reserves, it is required to generate stable returns. This structure limits its ability to aggressively increase national wealth through high-risk, high-return investments. In addition, under the Korea Investment Corporation Act, KIC is restricted 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 create national wealth."

Benchmarking the Singapore Model

Singapore, which the government has cited as a benchmark, operates GIC (Government of Singapore Investment Corporation) and Temasek, each with different investment strategies. GIC, like KIC, is a traditional sovereign wealth fund that manages the country's foreign exchange reserves, prioritizing asset value preservation and stable returns, and investing only 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, on the other hand, is an investment company launched based on government-owned assets and stakes in state-owned enterprises. It plays a role in increasing national wealth through active investments, including mergers and acquisitions (M&A), equity, and real estate. Temasek not only participates in the management strategies of key domestic companies such as Singapore Airlines as a major shareholder but also invests globally in growth industries, including 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 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 fiscal year 2025. 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 to Play Temasek's Role

The Korean-style sovereign wealth fund envisioned by the government is focused on fulfilling a role similar to Temasek. While KIC continues to generate stable returns by managing foreign exchange reserves, the Korean-style sovereign wealth fund will provide a channel for more active investment in promising domestic and international industries. Initially, it is expected to focus on domestic investment. Deputy Prime Minister Koo stated, "For proactive national wealth creation, we should be able to invest in anything that can increase returns, whether it is real estate, advanced industries, or bio. We will invest in domestic ventures and, if there are good companies abroad, we will be able to pursue M&A in advance to create national wealth." Kang Giryong, Deputy Minister for Planning and Coordination at the Ministry of Economy and Finance, 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 discussed as an initial resource. Deputy Prime Minister Koo said, "Temasek in Singapore also started very small, with about 200 million dollars, and has now grown to 320 billion dollars. Rather than securing a massive initial fund, we will allow shares received in kind to serve as resources." He added, "Once these resources enter the sovereign wealth fund, they will not simply be sold; if necessary, we can buy more or sell them with management rights attached." Deputy Minister Kang explained, "We are gathering ideas while considering stable funding sources and the impact on fiscal policy."

The government expects the fund to create a virtuous cycle of national wealth creation. Even if it starts with limited resources, the plan is to increase the value of domestic promising venture companies and high-profit strategic industries through active investment, and, in the long term, to also invest in promising overseas companies and real estate. The strategy is to reinvest the accumulated returns into future industries, allowing the fund to grow in scale.