Korea Investment Management Launches Loss-Differentiated 'Korea Investment Korea-U.S. Earnings Focus Fund'

Exclusively offered through Korea Investment & Securities through October 13
Selective investment in Korean and U.S. companies with high-quality earnings
A fund-of-private-equity-funds product
Losses are absorbed first by subordinated investors

Korea Investment Management said on the 12th that it is accepting investors in the Korea Investment Korea-U.S. Earnings Focus Fund, a public offering fund with a loss-differentiation structure, through October 13.

Korea Investment Management said the fund is being offered exclusively through Korea Investment & Securities, with the fund scheduled to launch on October 14.

The Korea Investment Korea-U.S. Earnings Focus Fund invests in leading companies in South Korea and the United States with high-quality earnings. The strategy prioritizes earnings quality over specific themes, based on the view that it is effective during stock market corrections and periods of rising interest rates. Companies with stable earnings-generation capabilities tend to be relatively less affected during market corrections and can command a premium even when interest rates are rising.

The fund is a fund-of-private-equity-funds product that invests in seven underlying private equity funds: Korea Investment Korea-U.S. Software, Korea Investment Korea-U.S. Platforms, Korea Investment Korea-U.S. Semiconductor Materials and Components, Korea Investment Korea-U.S. Shipbuilding, Korea Investment Korea-U.S. AI Semiconductors, Korea Investment Korea-U.S. On-Site Power, and Korea Investment Korea-U.S. Financial Services. It plans to diversify its investments, allocating around 14% to each underlying fund.

Because of its loss-differentiation structure, losses are not immediately passed on to customers. For losses of up to 15% at the underlying private equity fund level, subordinated investors absorb the losses first. From the customer's perspective, therefore, only losses exceeding 15% are reflected. When the fund generates a profit, customers and the company share returns at a ratio of 85 to 15 on returns of up to 10% at the underlying fund level, and at a ratio of 55 to 45 on returns exceeding 10%.

The fund will be managed for up to three years and will be redeemed early if the customer's return reaches 15% before maturity. However, if this target is reached within one year of the fund's launch, the investment will be shifted to liquid assets such as money market funds (MMFs) and managed that way until the one-year mark.

Hwang Woo-taek, general manager of the Global Equities Management Department and the fund's lead portfolio manager, said, "The Korea Investment Korea-U.S. Earnings Focus Fund invests only in companies selected for their outstanding earnings-generation capabilities in South Korea and the United States. Amid heightened share-price volatility and high interest rates, what matters is whether a company can generate earnings consistently."

He added, "The fund will invest only in companies that generate higher profits when compared with peers with the same capital base, consistently earn profits without being swayed by business cycles, and have strong financial soundness that enables them to withstand high interest rates."

Meanwhile, the Korea Investment Korea-U.S. Earnings Focus Fund is a product whose returns are determined by investment performance. Investors may lose principal depending on market conditions, and if some underlying funds incur substantial losses, losses exceeding expectations may occur at the public fund level even after losses are covered by subordinated investment capital.

This content was produced with the assistance of AI translation services.