Picking 'companies that generate strong profits' in Korea and the U.S.; Korea Investment Management launches tiered profit-and-loss fund

[Financial News] A publicly offered fund that selects and invests in companies with stable earnings-generating capacity in the Korean and U.S. stock markets is set to launch. It is designed to reduce investors’ downside risk in volatile markets by having subordinated investors absorb a portion of investment losses first.
Korea Investment Management said on the 12th that it is seeking investors for its publicly offered fund with a tiered profit-and-loss structure, the Korea Investment Korea-U.S. Earnings Focus Fund, through the 13th. The fund will be sold exclusively by Korea Investment & Securities Co., Ltd. and is scheduled to be established on the 14th.
The fund invests in leading companies in Korea and the U.S., focusing on the 'quality of earnings' rather than on any particular theme. This reflects the view that companies with stable earnings-generating capacity and sound financials can deliver relatively resilient performance even during stock-market corrections or in a high-interest-rate environment.
The fund is a private-fund fund-of-funds product that invests in seven underlying private funds. It plans to diversify across seven areas—software, platform businesses, semiconductor materials/components/equipment, shipbuilding, AI semiconductors, on-site power and financial services—with about 14% allocated to each.
If losses occur, subordinated investors bear them first until the underlying private funds’ returns reach -15%. Under the structure, customers are affected only by losses beyond -15%.
When the underlying private funds generate returns of up to 10%, customers and the company share them in an 85-to-15 ratio. Returns above 10% are divided in a 55-to-45 ratio. In exchange for downside protection, some of the gains generated when returns rise are shared with subordinated investors.
The maximum investment period is three years. If customers’ returns reach 15% before maturity, the fund will be redeemed early. However, if the target return is reached within a year of the fund’s establishment, it will be converted into liquid assets such as money market funds (MMFs) and managed that way until the one-year mark.
“With stock-price volatility rising and interest rates high, it is important to know whether a company can generate earnings steadily,” said Hwang Woo-taek, head of the Global Equity Management Division at Korea Investment Management. “We will select and invest in companies that generate higher profits with the same amount of capital, remain resilient through market cycles and have sound financials.”
[email protected] Bae Han-geul Reporter