South Korea will establish a 20 trillion won investment fund dedicated to artificial intelligence, semiconductors, robotics, defense, and biotechnology. The government will house the account within the Korea Investment Corporation (KIC) and, for the first time, authorize the sovereign wealth manager to invest in domestic strategic industries. The move represents a notable departure for KIC, which like most sovereign wealth funds has historically invested abroad to diversify reserves and avoid distorting domestic markets. Officials say the fund is designed to reinforce economic security, draw foreign capital, and support key technology companies over a multi-decade horizon.

KIC Mandate Expands Into Domestic Markets

Approximately 16 trillion won of the fund's initial capital will come from government-held shares in major state-run financial institutions, including Korea Development Bank, Export-Import Bank of Korea, and Industrial Bank of Korea. An additional 4 trillion won will be contributed through shares transferred via inheritance and gift tax payments. Further capital may be sourced from semiconductor tax surpluses, private donations, and other public funds.

Unlike conventional policy funds, the new account will carry no fixed maturity or scheduled liquidation date, allowing managers to finance projects that need stable, long-term capital across multiple business cycles. This perpetual-capital structure mirrors the approach of large endowment-style investors such as Norway's Government Pension Fund Global, and is relatively unusual for Korean state-backed vehicles.

The account will purchase equity directly and exercise voting rights in selected domestic companies. South Korea also intends to leverage the vehicle to strengthen corporate governance and shield strategically important technologies from hostile takeover attempts. The governance focus aligns with Seoul's broader corporate value-up program, launched in 2024 to address the persistent valuation gap between Korean equities and regional peers — the so-called Korea discount. KIC will keep this domestic account separate from its foreign reserve investment portfolio.

Fund Targets AI, Chips, Robotics, and Defense

The government wants the fund to channel capital into industries that underpin national competitiveness and industrial resilience. Priority sectors include AI infrastructure, semiconductors, data centers, robotics, defense, and biotechnology. South Korea is home to Samsung Electronics and SK Hynix, the world's two largest memory chipmakers, making semiconductor leadership a central economic and security priority for Seoul.

Officials expect the fund to identify promising local companies at an early stage, before those firms seek larger financing rounds. A domestic anchor investor, they believe, can attract sovereign wealth funds, pension funds, and global asset managers who have been looking for Korean partners capable of screening projects and managing local market risks.

Rather than serving as a passive financing tool, the fund will take an active ownership role. KIC managers will evaluate each investment on its merits, while the government establishes broad strategic priorities. South Korea says this structure will preserve professional independence while advancing wider national policy objectives.

Legislation Sets Course for 2027 Launch

The government intends to submit amendments to the Korea Investment Corporation Act in August. The National Assembly must approve the revisions before KIC can commence domestic strategic investments. South Korea aims to begin fund operations in 2027, following completion of the legislative process.

KIC, originally established to manage public funds and support the country's foreign reserve program, reported approximately $232 billion in assets under management at the end of 2025. Its original mandate was focused primarily on overseas assets and foreign currency returns.

The initiative comes after a 34% July decline in the Kospi index and significant losses among major Korean semiconductor companies. Separately, South Korea is planning a 200 trillion won National Growth Fund targeting AI and advanced industries. Together, both programs are intended to expand long-term capital availability and bolster the country's position in global technology markets. The combined 220 trillion won in planned commitments places Seoul among the governments committing the largest state-backed capital pools to strategic technology, alongside comparable initiatives from the United States, Japan, and the European Union.