Korea to launch $13.9 bil. sovereign wealth fund for strategic industries

Minister of Finance and Economy Koo Yun-cheol speaks during a meeting of economic affairs ministers at Government Complex Seoul, Friday. Yonhap

The government will launch a 20 trillion won ($13.9 billion) sovereign wealth fund next year to make long-term investments in strategic domestic industries, including artificial intelligence, chips, robotics, defense and biotechnology, officials said Friday. The fund will be established within the Korea Investment Corp. (KIC).

The plan was announced Friday at a meeting of economic affairs ministers chaired by Minister of Finance and Economy Koo Yun-cheol.

The government plans to capitalize the fund with about 16 trillion won in shares it holds in state-run financial institutions, including the Korea Development Bank, the Export-Import Bank of Korea and the Industrial Bank of Korea. It will also contribute roughly 4 trillion won in shares received in lieu of inheritance and gift taxes.

Additional funding may come from surplus tax revenue generated by the semiconductor industry and from private donations.

Unlike existing policy funds, the new vehicle will operate as "ultralong-term patient" capital, with no predetermined maturity or liquidation date.

It will make direct equity investments in strategic industries, exercise the voting rights attached to its holdings and take an active role in corporate governance. The government expects the fund to protect key national technologies and help shield domestic companies from hostile takeovers.

"Around the world, governments are increasingly using strategic sovereign wealth funds not only to build national wealth but also to strengthen economic security and pursue active industrial policies," Koo said. "We will establish a strategic investment account within the KIC and transform it into a comprehensive sovereign wealth fund."

The government cited similar moves overseas, noting that Indonesia launched Danantara in February 2025, while Taiwan and Canada announced plans in May and April, respectively, to establish strategic sovereign wealth funds.

The KIC, however, was created as a savings-type sovereign wealth fund to manage part of the country's foreign exchange reserves. Its mandate has therefore largely been limited to overseas investments denominated in foreign currencies and aimed solely at generating financial returns.

"The government will use the operating committee only to set broad investment directions for strategic industries," a ministry official said. "All strategic investment decisions will be independently reviewed and ultimately approved by the KIC's board."

The government also said overseas sovereign wealth funds and pension funds have continued to seek Korean partners for co-investments in the country’s strategic industries. The new fund could serve as a trusted local partner by identifying promising Korean companies and helping foreign investors manage investment risks, it added.

Officials expect the fund to help ease volatility in the foreign exchange market by attracting foreign capital. They also believe it could cushion the impact on domestic asset markets when the National Pension Service is expected to begin selling assets on a significant scale in the mid-2050s.

The government plans to submit a revision to the Korea Investment Corporation Act in August. Subject to parliamentary approval by the end of the year, the fund is expected to begin operations next year.