Korea Investment Management is rolling out a public fund with a tiered profit-and-loss structure that spreads money across blue-chip market leaders in South Korea and the United States, targeting investors facing stock market volatility and high interest rates. Its defining feature is that subordinated investors absorb the first 15% of any losses at the underlying private fund level, strengthening principal protection for retail investors in the public fund.
Korea Investment Management said on the 12th that it is launching the Korea Investment Korea-U.S. Earnings Focus Fund, a fund-of-private-funds vehicle that selects top-quality stocks in both countries. Rather than concentrating on a single market theme, the fund focuses on leading companies in both markets with proven free cash flow and earnings power.
The portfolio is structured as a fund of funds holding seven underlying private funds. They include Korea Investment Korea-U.S. Software, Korea Investment Korea-U.S. Platform, Korea Investment Korea-U.S. Semiconductor Materials and Equipment, Korea Investment Korea-U.S. Shipbuilding, Korea Investment Korea-U.S. AI Semiconductor, Korea Investment Korea-U.S. On-site Power and Korea Investment Korea-U.S. Financial Services. Each underlying fund will be allocated roughly 14% of assets in an equally weighted approach.
The fund also applies a tiered profit-and-loss structure. If the underlying private funds post losses, subordinated investors bear the first 15%, shielding public fund investors from principal losses. On the upside, gains of up to 10% at the underlying private funds are split 85-15 between investors and the company, while returns above 10% are divided 55-45.
The fund has a maximum term of three years. It will be redeemed early if the cumulative return exceeds 15% before maturity. If the early redemption threshold is met within one year of the fund's launch, however, the assets will be shifted into liquid instruments such as money market funds and managed conservatively until the one-year mark. Subscriptions are being offered exclusively through Korea Investment & Securities until the 13th.
Hwang Woo-taek, the lead portfolio manager and head of the global equity management division at Korea Investment Management, said the firm selected only companies that generate higher margins from the same capital base rather than simply posting top-line growth, and that maintain financial soundness resilient to economic cycles. "For investors seeking excess returns based on stable earnings power at a time of heightened stock market volatility, this should be an effective alternative," he said.