Sovereign Wealth Funds: A Case Study of Korea Investment Corporation

Andrea Paltrinieri¹, Flavio Pichler², Stefano Miani¹
(1.University of Udine, Italy; 2.University of Verona, Italy)

Abstract: Based on “in-depth study”, the aim of the paper is to investigate Korea Investment Corporation (KIC), a non-commodity Sovereign Wealth Fund, in order to analyze its investment strategies over the time (2005-2012) and evaluate any form of “political bias”. Our results suggest that KIC pursues financial objectives, aiming to maximize the portfolio risk/return relationship, as it manages foreign excess reserves of those managed by Bank of Korea. We also argue that a form of “internal political bias” affects investment process, as most of the financial resources are managed in-house. Overall, we support the hypothesis that in Korea Investment Corporation both financial and political objectives coexist.

Key words: sovereign wealth funds (SWFs); institutional investors; asset allocation; political bias; Korea Investment Corporation

JEL codes: G23, G29