South Korea reorganizes its sovereign wealth fund plan! KIC sets up a strategic investment account, with nuclear energy, aerospace, and overseas supply chains all included.

The South Korean Ministry of Economy and Finance has announced a restructuring plan for the sovereign wealth fund program, setting up a strategic investment account within KIC to focus on nuclear power, aerospace, and overseas supply chains.
（Background recap: South Korea rolls out “AI second-level monitoring” to crack down on crypto market manipulation! Advancing the second phase of legislation for the Digital Asset Basic Act）
（Background supplement: The IMF has raised its forecast for South Korea’s 2026 economic growth to 2.6%, the highest in the world: memory chips are selling way too well）

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• Shift from the Temasek model to an internal KIC account
• Aligning with South Korea’s second-half 2026 economic growth strategy
• Differences between the Temasek model and an internal KIC account

South Korea has shelved plans to emulate Singapore’s Temasek Holdings and Australia’s Future Fund to establish a standalone sovereign wealth fund, instead setting up a strategic investment account within the Korea Investment Corporation (KIC) to focus on areas crucial to national competitiveness and economic security.

Shift from the Temasek model to an internal KIC account

On July 15, South Korea’s Ministry of Economy and Finance said the new account will invest in domestic and overseas strategic industries and core sectors, with investment directions including:

• Strategic industries: nuclear power, aerospace, and other advanced manufacturing
• Core sectors: finance, infrastructure
• Overseas supply chains: layouts for globally critical raw materials and zero-to-one components

Compared with an independent sovereign wealth fund, the advantage of an internal KIC account is that it does not require building a separate governance structure, and can instead directly use KIC’s existing investment teams and operating foundation. KIC currently manages more than $300 billion in assets, making it one of the largest public investment institutions globally.

Aligning with South Korea’s second-half 2026 economic growth strategy

This move closely follows the South Korean government’s release on July 14 of the “Economic Growth Strategy for the Second Half of 2026.” In addition to pushing digital asset legislation and introducing spot Bitcoin ETFs, the document also emphasizes strengthening national competitiveness through strategic investment.

The Korea Institute for Economic Research estimates that if the strategic investment account is fully in place by 2027, it could contribute about 0.3 percentage points to South Korea’s potential growth rate. Combined with tailwinds such as the recovery in memory semiconductors, South Korea’s 2026 GDP growth rate could reach 2.6%, ranking first among major global economies.

Differences between the Temasek model and an internal KIC account

Temasek is known for an active shareholder model, directly holding stakes and participating in corporate governance. Australia’s Future Fund is earmarked for specific purposes, concentrating resources into priority areas. South Korea’s internal KIC account model lies between the two: it preserves KIC’s market-oriented investment mechanism while adding policy-driven strategic goals.

Market interpretation: This suggests the South Korean government wants to quickly launch strategic investment channels without increasing administrative costs, especially for industries like nuclear power and aerospace that require long-term capital investment.