[Edaily Marketin KIM SUNG-SOO Reporter] Efforts to amend legal provisions to develop the Korea Investment Corporation (KIC) into a “Korean-style Temasek” are expected to begin in earnest.

Rather than establishing a new sovereign wealth fund to support the development of domestic high-tech industries, the plan is to create a new “strategic investment account” by the end of the year to enable the existing sovereign wealth fund, KIC, to make domestic investments. However, observers note that even if the legislation is amended, significant time will be required to refine the system, meaning the first investments are unlikely to take place until next year or later.

Laying the Legal Groundwork for KIC’s “Domestic Won-Denominated Investments”

According to the investment banking (IB) industry on the 16th, the government is preparing to amend the Korea Investment Corporation Act to establish a separate “Domestic Strategic Account” within KIC, rather than launching a Korean-style sovereign wealth fund as an independent entity.

This approach involves maintaining KIC’s existing function of managing overseas foreign-currency assets while separating its domestic industrial investment function into a separate account.

Under Article 31, Paragraph 4 of the current Korea Investment Corporation Act, KIC is required to manage assets entrusted by the government, the Bank of Korea, and fund management entities as foreign currency-denominated assets abroad.

Furthermore, Article 31, Paragraph 5 of the same Act stipulates that if KIC manages assets denominated in Korean won as an exception, it must do so in a stable and neutral manner, such as by depositing the assets with financial institutions or purchasing government and public bonds.

These provisions are scheduled to be amended to allow for domestic investments in the future. Once the amendment is finalized, KIC will secure the legal basis to establish a domestic strategic account—separate from its overseas investment account—and proceed with investments in won-denominated assets.

Funding strategies are also under review. The government is considering utilizing dividends from public enterprises and government capital injections.

Although the nominal capital is 20 trillion won, there is insufficient cash available for actual investment, so additional government capital injections are considered a key factor that will determine the fund’s success or failure.

It has recently been reported that the seed money (initial investment funds) required for the Korean sovereign wealth fund is approximately 600 billion won, based on dividends from public enterprises.

600 billion won in funding required based on public enterprise dividends

KIC is a public institution that pays government dividends, determining distributions to shareholders based on current-period profits.

According to the cash flow statement in KIC’s 2025 Annual Report (Korean version), cash dividends paid out last year totaled 113,828,790,000 won. This represents a 20.6% increase from the cash dividends paid in 2024 (94,383,070,000 won).

Amid repeated “revenue shortfalls” in recent years, the government is demanding active dividend payments from public enterprises and sovereign wealth funds.

In fact, dividends collected from 20 of the 40 government-invested institutions reached 2.7951 trillion won this year, marking an all-time high. Of this amount, dividends paid by KIC totaled 83.5 billion won.

KIC’s dividend payout ratio stands at 80%, second only to the Korea Pipeline Corporation (90%). This figure is approximately twice the average dividend payout ratio (40.90%) of government-invested institutions.

The market believes that KIC will reach a new turning point if it secures a domestic strategic account. This would expand KIC’s role from that of an overseas asset management institution to that of an investment institution for domestic strategic industries.

However, it is expected to take some time before actual investments are made. Given that significant time is required for institutional reforms—including legislative amendments, the establishment of new organizational units, the development of an investment framework, and the formulation of operational guidelines—observers predict that the first investments will not be possible until next year or later.

An official in the financial investment industry stated, “For KIC to invest domestically, there are no small challenges to overcome, such as amending the Korea Investment Corporation Act, securing additional funds, and establishing a new investment organization,” adding, “It will take some time before this ‘Korean-style Temasek’ begins full-scale investment.”

The official added, “Since KIC is expected to apply the global standards it has used for overseas investments to domestic investments as well, the quality of the domestic capital market is also expected to improve accordingly.”