The Financial Services Commission has wrapped up the process of selecting sub-fund managers that will handle investments ahead of the launch of the Public Growth Fund, a public participation vehicle. With a benchmark return of around 6% a year, combined with loss-protection features and tax benefits, expectations are rising for investor inflows.

According to financial authorities on the 3rd, the Financial Services Commission plans to announce next week the selection results for the 10 sub-fund managers of the Public Growth Fund. Once the selection is complete, the fund will debut in the market this month.

Lee Eog-weon, chair of the Financial Services Commission, delivers opening remarks at the second Strategy Committee meeting of the Public Growth Fund at the Korea Deposit Insurance Corporation (KDIC) in Jung-gu, Seoul on the 14th last month. /Courtesy of News1

The Public Growth Fund pools public money to invest in stocks, bonds, and more. It will be created at a total size of 600 billion won, of which 120 billion won will come from fiscal resources. Sales will be handled by Mirae Asset Global Investments, Samsung Asset Management, and KB Asset Management.

Managed capital will focus on advanced strategic industries and innovative companies. Each sub-fund must invest at least 60% of total capital in 12 strategic industries, including semiconductors, secondary batteries, hydrogen, future mobility, biopharma, artificial intelligence (AI), and robotics.

Of that, 30% or more will be deployed as new capital into unlisted companies (10% or more) and KOSDAQ technology-track listed companies (10% or more). Investment in KOSPI-listed companies is capped at 10%, while the remaining 40% is left to the manager's discretion. Performance by sub-fund will be pooled and settled, then distributed to investors.

The return structure is built around a benchmark return of 30% over five years (6% annually). If returns exceed that level, the manager receives performance fees. The government will also take a junior position to absorb up to 20% of losses first, reducing investment risk.

Tax benefits are also provided. For investments of three years or longer, income deductions apply, with benefits up to 18 million won. Deduction rates by bracket are 40% up to 30 million won, 20% for 30 million to 50 million won, and 10% for 50 million to 70 million won.

A financial authority official said, "The public participation Public Growth Fund is aimed not only at fostering strategic industries but also at sharing its outcomes with the public," adding, "With that in mind, we designed fund operations and other elements with balance."

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