Koo Yun-cheol, South Korea’s deputy prime minister and minister of economy and finance, announced last week that the country will launch a new sovereign wealth fund—the National Growth Fund—using Australia’s Future Fund and Singapore’s Temasek as a guide for how to invest.
The new fund will be seeded with A$152 billion ($100.96 billion): half in government guaranteed bonds and half from the private sector. The aim is to reinvigorate the country’s slowing national economy.
South Korea’s existing wealth fund, the Korea Investment Corp., invests using foreign exchange reserves and only invests outside South Korea. The new fund will be able to invest more broadly, including “proactively acquiring good companies overseas through M&A and investing in domestic ventures,” according to information from the ministry.
According to the announcement, the new fund will divide the investments into direct equity investments, indirect equity investments, infrastructure holdings and low-interest lending support.
“Temasek in Singapore basically engages in mergers and acquisitions; invests; and purchases many buildings in industries with future growth potential,” Koo said in a statement. “However, since the Korea Investment Corporation manages foreign exchange reserves, it cannot be operated in such a manner, and therefore cannot actively generate national wealth. …
If there are items that can actively generate national wealth, we will invest in them regardless of the industry, including promising future sectors.”
The government, which won power in a June election, also announced a plan to introduce exemptions to promote investment in high-tech industries, such as artificial intelligence and robotics. Currently, regulations state that a holding company’s second-tier subsidiary must own 100% of any third-tier subsidiaries. This will be reduced to a minimum of 50% to assist industries that require large-scale investment.
The government will also look to ensure balanced regional development, with 40% of investments to be allocated outside of Seoul and to be approved by the Fair Trade Commission, according to the statement.
The National Growth Fund is expected to begin investing in early 2026.
Plans for the fund have been in the works for some time, with the fund originally to total $100 billion in assets. However, in September, it was announced it would be scaled up, with a focus on investing in key strategic industries such as semiconductors, biotechnology, artificial intelligence, vaccines, hydrogen and future mobility.
A version of this article originally appeared in our sister publication, Financial Standard, which, like CIO, is owned by ISS STOXX.
Tags: Future Fund, Korea Investment Corp., Temasek