Korea's $200B Plan for the Sovereign Fund Major League
Korea’s $84.7 billion sovereign wealth fund (SWF) will overhaul its “culture, processes, and behaviors” under its new CEO in response to government and public criticism.
“KIC’s very existence could come into question without change and innovation.”The Korea Investment Corporation (KIC) yesterday announced the appointment of former World Bank Executive Director Sung-Soo Eun as its CEO. He replaces Hongchul Ahn, who quit in November.
KIC came under fire from some quarters following a disastrous $2 billion investment with Merrill Lynch in 2008. The move lost at least $720 million, prompting for CEO Ahn to publicly apologize and promise to “remember the painful lesson.”
In a speech to staff, published on the organization’s website, Eun vowed to make the fund more transparent and more competitive with other sovereign investors. He targeted a portfolio size of $200 billion—more than double KIC’s current scale—and a reputation alongside the top SWFs.
“To join the ranks of the world’s leading sovereign funds, I believe we must excel in times of hardship,” Eun said. “In fact, now might be an ideal opportunity for KIC to show what we’re made of, both to ourselves and the world.”
Eun outlined three core principles he hoped to instill to reach that next echelon: transparency, performance, and strong internal morale.
“Considering the audit results and critiques from the National Assembly and media, KIC’s very existence could come into question without change and innovation,” Eun said.
“To become transparent, honest, and reliable—to become a ‘clean KIC’—we must have transparent investment processes and reasonable decision-making procedures, and we must strengthen the role of the compliance officer and improve internal controls,” he added.
Eun claimed that his three principles would ensure that “KIC will become one of the world’s top 10 leading sovereign wealth funds.”
Related: Slow Progress on SWF Governance Standards & SWFs: Activist Investors or Passive Stock Pickers?