A notice at the main branch of Shinhan Bank headquarters in Seoul announces that both online and offline subscription quotas for the state-backed National Growth Fund had sold out, Friday, the opening day of retail subscriptions. Newsis
Korea’s state-backed investment fund targeting next-generation industries such as artificial intelligence (AI) drew strong investor interest on Friday, the first day of public subscriptions, as investors flocked to banks and brokerages to secure allocations.
Yet despite the buying rush, experts warn that the fund’s eventual returns remain far from guaranteed as its structure effectively locks investors’ money away for five years — a lengthy commitment in fast-moving technology sectors. They echoed earlier policy funds that delivered underwhelming returns.
The fund is part of the Korea National Growth Fund launched late last year, one of President Lee Jae Myung’s key economic initiatives aimed at fostering advanced industries, including AI, semiconductors, biotechnology, robotics and rechargeable batteries.
The new fund is designed as a fund-of-funds structure, where 3 trillion of the broader 150 trillion won ($99 billion) program has been earmarked for public participation. The fund aims to raise 600 billion annually over the next five years by pooling retail investors’ capital into three master funds, which will subsequently invest in 10 subfunds.
Subscriptions are being offered on a first-come, first-served basis until June 11 through 10 banks and 15 brokerages, although sales will close early once all available allocations run out.
Two features appear to have fueled much of the early investor rush.
The structure also includes a built-in downside buffer, with the government set to absorb up to 20 percent of losses incurred by subfunds before private investors take any losses.
But those benefits also come with significant risks, fueling skepticism over the fund’s long-term profitability.
Most notably, the fund comes with a five-year lockup period. While holdings can technically be sold on the exchange, limited liquidity could force investors to exit at prices below the fund’s net asset value. And selling within three years would trigger a clawback of much of the tax benefit.
Source: Korea Times News
