South Korea launches W880b ultra-long-term tech fund, with 40% earmarked outside AI, semiconductors

South Korea has launched the selection process for managers of its ultra-long-term technology investment fund, a vehicle designed to supply capital for up to 16 years to advanced technology companies that require extended timelines before commercialization. The fund targets 880 billion won ($627 million) this year, with at least 40 percent of its core investment capital mandated for sectors outside AI and semiconductors.

The Financial Services Commission said Thursday it had begun soliciting proposals for fund managers through Korea Development Bank and Woori Asset Management. Proposals are due by Sept. 3, after which a review will determine the final lineup of managers in October. Investment deployment is expected to begin as early as year-end.

The ultra-long-term technology investment fund is an indirect investment program under the National Growth Fund, created to support technology companies in fields such as next-generation semiconductors and advanced biotech that require long development and commercialization periods. Unlike conventional policy funds, which typically run for eight to 10 years, the new fund has a base term of 13 to 15 years with an option to extend by up to one year. The investment period has also been set at six to seven years, longer than the four to five years typical of existing funds.

Of the 880 billion won target for this year, 680 billion won will come from public sources — 600 billion won from the Advanced Strategic Industries Fund and 80 billion won from the government budget — covering 77 percent of the total, with the remaining 23 percent to be raised from the private sector. The structure is intended to reduce the fundraising burden on private managers given the extended time horizon before returns can be realized.

Seven fund managers will be selected in total: three in a small-cap tier, each overseeing a fund of 80 billion won, and four in a mid-cap tier managing funds of 160 billion won each. Startup accelerators with expertise in early-stage company discovery and incubation will be eligible to apply alongside private equity funds and venture capital firms.

To ensure diversity in investment targets, managers will be required to allocate at least 40 percent of their core investment capital to sectors outside AI and semiconductors — double the 20 percent threshold considered in earlier drafts. The FSC said the higher requirement is intended to channel more funding into areas such as biotech and defense, which have historically struggled to secure long-term financing. The commission also plans to amend the Korea Development Bank Act's enforcement decree in the second half of this year to add aerospace and other advanced industries to the list of eligible sectors under the National Growth Fund.

In evaluating fund manager candidates, the FSC will weigh technology investment capability more heavily than short-term returns. Assessments will examine whether key investment personnel have a track record of guiding portfolio companies to commercialization, and whether they have access to in-house specialists or external technology expert networks in relevant fields. Investments in companies that have received a top-five technology credit rating or have undergone technology or intellectual property valuation will count as qualifying core investments.

Meanwhile, the government is broadening its policy finance tools to channel long-term capital into strategic industries. Next year, it plans to establish a "strategic industry investment account" of more than 20 trillion won within the Korea Investment Corporation, and to strengthen coordination with existing policy funds including the National Growth Fund.