South Korea prepares second round of public growth fund, sub-fund managers to be picked in August

The Financial Services Commission said Monday it has launched the selection process for sub-fund managers who will handle investment operations for the second round of the public participation-type National Growth Fund, set for release in the third quarter.

The FSC is preparing a second fund worth 600 billion won ($390 million) for a third-quarter launch after the first round sold out ahead of schedule in May.

To speed up the launch, the fiscal mother fund manager — Korea Growth Finance Investment Management — and the public offering fund managers — Mirae Asset, Samsung and KB Asset Management — have been retained from the first round. Only the sub-fund managers will be newly selected.

The 10 sub-fund managers from the first round may also apply to manage the second fund. However, they must submit a separate, detailed management plan covering their capacity to raise additional funds, the current status and plans for managing the first-round fund, and measures to prevent conflicts of interest between the first and second funds.

The primary investment targets, sub-fund size and number of sub-funds will remain the same as in the first round.

The main investment focus — designated primary-purpose investments — covers companies in advanced strategic industries and related businesses. Each sub-fund must allocate at least 60 percent of its committed capital to these primary targets. At least 30 percent of each sub-fund's committed capital must go toward new capital injections — such as rights offerings or mezzanine instruments — into unlisted companies (at least 10 percent) and Kosdaq technology-exception-listed firms (at least 10 percent). Up to 40 percent of each sub-fund's committed capital may be invested freely.

Sub-fund managers will submit proposals by July 20, following the plan announced Monday, with evaluation and selection to be completed in August.

The second National Growth Fund is expected to launch in the third quarter after sub-fund manager selection, filing a securities registration statement for the public offering fund, and completing distributor preparations. Sales-related details — including priority allocations for lower-income investors and the share of online sales — will be revised to improve public convenience based on first-round sales results and feedback from distributors such as banks and brokerages.

The National Growth Fund is an indirect investment vehicle through which the public can participate in funding a portion of the investment pool, designed to share the long-term returns of the National Growth Fund with ordinary citizens. Investors receive tax benefits including an income deduction of up to 40 percent of the invested amount and a separate flat tax rate of 9 percent on dividend income.

The first round, launched at 600 billion won on May 22, saw 87 percent of its total allocation subscribed on the opening day and sold out within five business days, closing May 29. Seeing demand exceed expectations, the FSC decided to offer an additional supply in the second half of the year.