Shareholder Spotlight : The Rotten Core of Korea Investment Corporation

Korea’s sovereign wealth fund loves to pose as a sober guardian of the nation’s future. Underneath the brochure talk sits cronyism, rule breaking, political meddling and public money parked in a serial polluter.

Korea Investment Corporation was set up in 2005 to look after the country’s foreign exchange reserves. By the end of 2024 it was sitting on roughly 206 billion dollars. That is not abstract capital. It is the stored work of Korean taxpayers, handed to a state fund on the promise it will be managed carefully and cleanly.

KIC sells itself as a professional shop that diversifies risk, delivers long term returns and follows responsible investment principles. Look at the record and you see something else entirely: a political appointments club that bleeds credibility, breaks its own trading rules and treats “fiduciary duty” as decoration. Then, on top, it chooses to back Cummins Inc – a diesel manufacturer caught cheating emissions tests on a massive scale.

This is not a run of bad luck. It is a pattern.

Crony At The Top: The Ahn Hong chul Shambles

Go back to Ahn Hong chul, appointed in 2013. A political pick under the Park Geun hye administration, and paid like it. His 475 million won package made him the highest paid head of any state run body at the time. Nice work if you can get it.

What followed was exactly what you would expect from that sort of hire. Social media posts from the 2012 presidential race surfaced, where he had smeared opposition figures including the late President Roh Moo hyun and Moon Jae in. Not exactly the impartial tone you want from the man holding the national piggy bank.

Opposition parties demanded the Board of Audit and Inspection dig into his conduct. Questions were asked about his travel, his perks and his judgment. Under pressure, Ahn announced his resignation on 6 November 2015. Officially it was for “personal reasons”. In reality it was to get out before the auditors got properly stuck in. Even ruling party lawmakers were publicly calling for him to go.

The investment record under him was feeble. Returns slumped to around 4 percent, near the bottom of the sovereign wealth pack, just as other funds were putting up double digits. At the same time KIC tied itself in knots over a proposed commitment of more than 350 million dollars into a Los Angeles Dodgers stake. For a sovereign fund, that kind of trophy asset belongs on the “only if you are very sure” list. Instead it became another illustration of how easily political pressure, vanity and incompetence can mix when you treat public money like a private playground.

This is what happens when you treat KIC as a dumping ground for political loyalists. You do not get “stewards”. You get overpaid liabilities.

Collapse Of Confidence: Resignations And Brain Drain

After Ahn finally walked, KIC tried to pretend it was turning the page. A new chief executive arrived in 2016. Within months three of the top people in private equity and alternative investments resigned. More departures followed across investment teams.

You do not get that kind of exodus from a supposedly elite investor unless something is badly broken internally. Either the leadership is dysfunctional, the mandate is politicised, the incentives are warped, or all three. For the outside world it sent one loud message: if you are any good at this game, you do not stick around at KIC for long.

That talent drain matters. This is a fund that was created explicitly because South Korea needed professional management for a growing reserve pile. Instead, it burned through its own specialists and signalled that politics and internal turf wars matter more than performance.

Politics First, Taxpayers Second

KIC likes to insist it is independent. The state provides the money, but does not meddle. The Elliott Management saga makes a mockery of that line.

In 2010 KIC committed around 50 million dollars to Elliott, a US hedge fund. Years later Elliott was at the centre of the battle over the Samsung C&T – Cheil Industries merger and then dragged the Korean state through international arbitration over that deal. It accused the government of leaning on the National Pension Service to back the Samsung side and harming foreign investors in the process.

In the middle of this, KIC’s leadership started talking about the possibility of cancelling the Elliott mandate if the hedge fund was found to have broken laws or created conflicts. Performance was not the issue. Politics was. The message was clear enough. Cross the state and your business with KIC is at risk.

That is the opposite of arms length. It tells the market that KIC’s relationships can be bent by government anger. Any sovereign fund that plays that game poisons its own reputation. Investors and counterparties start to assume that every allocation, every redemption, every “risk decision” might in reality be a political one.

Cartel Behaviour In Public Money

The rot is not limited to headline fights. In 2017 KIC and the National Pension Service struck a gentleman’s agreement not to hire each other’s former fund managers. On the surface it looked like a neat solution to stop staff pinballing between two public giants.

In practice it was exactly the kind of soft cartel thinking you would expect from incumbents who fear competition. Two of the country’s biggest pools of capital quietly agreeing to freeze out each other’s ex employees does not smell like a free labour market. It drew fire for being anti competitive and potentially at odds with labour law.

For the individuals affected, it meant an unofficial blacklist. For taxpayers, it meant their money was being run by organisations that would rather cut cosy deals to control staff flow than compete for the best people on open terms.

When the people who manage national savings show this attitude to talent and fairness, you get a very clear sense of how they will treat everything else.

Ethical Rot: Forty Two Trading Breaches And Counting

Fast forward to 2025 and KIC is still demonstrating that its internal discipline is a joke. A parliamentary report revealed that employees had violated the fund’s personal trading rules 42 times. These are not student mistakes. These are staff inside a sovereign wealth fund, who know exactly how sensitive personal dealing is, choosing to ignore rules meant to prevent conflicts of interest.

Details are thin on each case. That is part of the problem. We are not told how many of those trades overlapped with KIC’s own activity, how many were simply late reported, and how many looked like outright front running. All we know is that dozens of breaches were recorded over a span of years.

At the same time, Korean regulators have been running investigations into unfair trading and illegal short selling more broadly. In that environment, KIC should have been a model of over compliance. Instead it is busy demonstrating that its own staff cannot be trusted to follow basic internal rules.

If you cannot police your own traders, you have no business telling the public your ESG and governance credentials are “world class”.

Backing Cummins: Public Money In An Emissions Cheat

Now for the Cummins piece. This is the part that drags KIC’s hypocrisy out into the open.

Recent public ownership data and portfolio breakdowns list Korea Investment Corporation as a shareholder in Cummins Inc, the US engine maker. The stake is not huge next to KIC’s 200 billion dollar balance sheet, but it is still a position running into the tens of millions of dollars at current prices. That is Korean public capital providing support to a company that has already been nailed for mass scale emissions cheating.

Cummins agreed in 2024 to pay a record 1.675 billion dollar civil penalty in the United States for violating the Clean Air Act. Regulators found that hundreds of thousands of diesel engines in Ram pick up trucks were equipped with defeat software that allowed them to pass lab tests while pumping out illegal levels of nitrogen oxides on the road. The settlement covered roughly 960,000 vehicles stretching across a decade of model years. On top of the fine, Cummins had to fund a huge recall and retrofit programme.

The company did the usual corporate shuffle. No formal admission of wrongdoing. Lots of talk about “moving forward” and “commitment to the environment”. The reality is simple. Software was built and installed that let engines cheat emissions rules. Those extra pollutants did not magically vanish. People breathed them.

KIC cannot pretend it did not know. The Cummins case was headline news. The penalty size alone made it impossible to ignore. Yet KIC chose to either maintain or initiate exposure. It tells you exactly how seriously this sovereign fund takes the words “climate risk” and “responsible investment”. They are slogans to paste into a slide deck, not hard lines that shape what goes into the portfolio.

From Suing Volkswagen To Hugging Cummins

The irony is almost too on the nose. In 2016 KIC sued Volkswagen over its own emissions cheating scandal, trying to claw back losses suffered when the share price collapsed. Back then the fund was happy to pose as the guardian of Korean investors, holding a foreign car maker to account for its lies.

Fast forward to the Cummins scandal and KIC is on the other side of the table. It is not suing. It is investing. Public money that once funded a lawsuit against one emissions cheat now helps support another that has paid an even bigger penalty.

You cannot square that circle. Either you believe that systematic emissions fraud is unacceptable and should have consequences, or you are willing to look the other way when your spreadsheets say the stock looks cheap.

KIC has chosen. It has decided that talking about ESG and “green finance” is enough, while the actual allocations can go wherever they like, including into companies that have admitted nothing yet paid massive sums to settle with regulators.

A Fund That Needs A Reckoning

Put it all together and you get a clear picture.

You have political appointees at the top, ejected only when the scandal heat becomes unbearable. You have waves of resignations from the investment teams that are supposed to be the engine of the whole operation. You have a cosy anti poaching pact with another public fund. You have dozens of breaches of personal trading rules by insiders. And you have an active decision to back a diesel manufacturer that has been caught gaming emissions standards on a huge scale.

KIC is not some neutral, technocratic steward of the nation’s savings. It is an institution soaked in politics, rotten governance and rank hypocrisy.

Korean citizens deserve better. At a minimum there should be:

Full public disclosure of all internal trading violations and what sanctions followed.
An end to political parachute appointments at the top.
Independent, external directors with teeth, not seat warmers.
A clear exclusion list that actually bites, starting with companies that have paid giant penalties for emissions cheating. Cummins should be gone.
A transparent explanation of how KIC’s approach to “responsible investment” squares with its current holdings.

Until that happens, every time KIC boasts about its returns or its ethics, remember this: it is your money, and they are using it to back polluters while breaking their own rules at home. They do not deserve trust. They deserve scrutiny.

If that makes them uncomfortable, good. It is long overdue.

Lee Thompson – The Cummins Accountability Project