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Korea Investment Corp: Korea joins the sovereign wealth fund adventurers

Korea Investment Corp has broken new ground for the country by investing $2 billion in Merrill Lynch.

More on sovereign wealth funds

In the flurry of east-west role-reversal commentary prompted by Asian and Middle Eastern sovereign wealth funds buying into Citi and Merrill Lynch, an interesting sub-plot has been missed. What is a Korean state agency doing buying into a Wall Street investment bank?

It is perhaps the strangest contribution of the lot. The Gulf’s sovereign funds have been investing internationally for decades, Singapore’s funds have been shifting their portfolios to a more global mix for almost as long, and even Mizuho’s involvement at Merrill, while interesting, is still simply a cash-rich private sector enterprise taking a tilt at a good valuation opportunity.

But the Korea Investment Corp? This just isn’t how Korea behaves. Even its corporations rarely make acquisitions overseas. Its stock market heavyweights, such as Samsung Electronics and Posco, have international operations but they rarely buy (in Samsung’s case because it’s still hurting from the last time it tried in the 1990s). Any cross-border acquisition involves cultural and language barriers but fears of such a clash seem to be particularly intense for Korean acquirers.

The first signs that this might be changing began last year, and in particular with Doosan Infracore’s $4.9

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