KIC sees regulation change to qualify KIC, Korean pension funds managers for CIO job

  • 2016-07-15

Korea Investment Corporation (KIC) has recently asked the finance ministry to revise part of regulations governing the sovereign wealth fund in order to qualify the KIC’s in-house officials and investment managers of domestic pension and savings funds for the post of its chief investment officer, a KIC source said on July 14.

The KIC source told the Korea Economic Daily that the Ministry of Strategy and Finance, which oversees the KIC, was positive about the proposed revision, and expected that the enforcement decree of the KIC Act would be revised in the near future. The prospective revision involves not only loosening the CIO qualifications, which will start to apply to its next CIO candidates, but expanding the scope of the KIC’s investible assets.

The key to the proposed revision is about requirements to become the KIC’s CIO. Under the enforcement decree of the KIC Act, a successful candidate for the CIO job must have worked for a “financial institution” or “international financial organization” for more than 10 years. According to the decree, a “financial institution” is defined as the Bank of Korea, domestic or foreign banks, insurance companies, asset management firms, and the like. In the category of the “financial institution,” the KIC itself, domestic pension or savings funds are not included.

Such regulations have barred investment experts who had worked at the KIC for a long period from applying for its CIO post, fueling criticism of so-called reverse-discrimination against the KIC’s in-house managers. The provisions also apply to CIOs and investment managers at the National Pension Service and the country’s retirement savings funds including the Korean Teachers’ Credit Union.

According to the proposed revision to the regulations, KIC and domestic pension and savings funds will be included in the category of the “financial institution” defined under the enforcement decree of the KIC Act.

In addition, KIC is expected to have a wider range of asset classes in which it is allowed to invest, with special asset classes such as vessels, infrastructure, intellectual property, etc. likely to be added to the list of investible assets. The KIC Act stipulates that the sovereign wealth fund can invest in stocks, foreign currencies, derivative products and real estate, as well as “other vehicles specified by the decree of the Act.” But the decree does not specify them. The expected revision to the decree will lay a legal foundation for expanding the range of the assets in which the KIC can invest.

The move comes shortly after Shin-woo Kang, a former civil member of the KIC’s steering committee and ex-CEO of a local asset management firm, was named as the CIO of the sovereign wealth fund last month.

By Chang Jae Yoo

koreaninvestors@hankyung.com

<Edited by Yeonhee Kim>