This article was published on the ChosunBiz MoneyMove (MM) site at 9:05 a.m. on Sept. 29, 2025.
The government's plan to expand private capital inflow into the venture investment market through the business development company (BDC) system has been shunned by the market. Although the enforcement date is six months away, venture capital firms (VCs), which were originally expected to be the main operators of BDCs, are avoiding participation citing operational burdens.
According to the VC industry, many of the large domestic VCs with assets under management (AUM) of 1 trillion won or more, including Korea Investment Partners, Atinum Investment, IMM Investment, SV Investment, InterVest, and DSC Investment, are understood not to be considering operating BDCs.
BDCs are public offering funds that supply venture capital to unlisted venture and innovative companies. Discussion began in 2018 as part of measures to revitalize investment in innovative companies, and riding the government's push to expand the venture investment market, the amendment to the Capital Markets Act passed the National Assembly at the end of August. Implementation is scheduled for March next year.
Initially, the market expected VCs to participate in operating BDCs. There was growing hope that idle private funds could be drawn into a public offering fund format, providing an alternative amid fundraising difficulties. Given that more than half of a fund's assets must be invested in venture and innovative companies, VCs were also seen as having operational competitiveness.
As a result, VCs, along with asset management companies, were listed as the first-priority operators in the Capital Markets Act amendment that provides the legal basis for introducing BDCs. The structure, which involves listing on the exchange as a prohibited-redemption fund with a term of more than five years, will take effect in March next year. Securities companies were excluded due to concerns over conflicts of interest between proprietary accounts and client assets.
The analysis is that operational burdens have led VCs to avoid participation. Because BDCs are structured as public offerings and listings, they require permanent separate organizations for valuation, disclosure, investor relations and compliance. VCs operate private funds that deal with a small number of limited partners, and they lack the personnel and organizational foundation to handle public fund operations.
The fact that management fees are not large is also cited as a reason for the avoidance. Because BDCs will be listed on the exchange and operate in a structure similar to exchange-traded funds (ETFs), total fees (management fees and other operating expenses) are expected to be less than 1%. Venture fund management fees are typically set around 2%.
An executive at a large domestic VC said, "The BDC system is, in name, 'expanding private capital, broadening the investor base,' but in reality it is an ETF that individual investors invest in," adding, "It spends a lot on quarterly fair value valuations, external growth evaluations and frequent disclosures, but it doesn't make much money."
Given the situation, only VCs affiliated with financial groups are reportedly showing exceptional interest in operating BDCs. KB Investment and Mirae Asset Venture Investment are representative examples. However, these firms are also understood not to have started procedures such as recruiting separate operating personnel or preparing operational plans.
Financial authorities are also closely monitoring the situation. The Financial Services Commission and the Korea Financial Investment Association have recently been considering an option to early include securities companies as BDC operators. This is based on the judgment that initial market activation will be difficult due to VC avoidance. The Korea Financial Investment Association has also formed a BDC task force targeting securities companies.