The Financial Services Commission said it will sell the Public Participation Growth Fund to the general public for three weeks starting on the 22nd. The Financial Services Commission (FSC) plans to raise 600 billion won from the general public through the Public Participation Growth Fund.
The Public Participation Growth Fund is designed as a private fund-of-funds public offering structure that pools citizens' money into a parent fund and invests it in multiple sub-funds. In light of the general public's participation in fostering future growth industries, fiscal funds will participate in each sub-fund as a subordinated investor and will bear losses first within a 20% range for each sub-fund.
The primary investment target of the Public Participation Growth Fund is advanced strategic industry corporations and related corporations, identical to the investment target of the Public Growth Fund. The target industries are 12 sectors: semiconductors, secondary batteries, vaccines, displays, hydrogen, future vehicles, bio, artificial intelligence (AI), defense, robots, content, and critical minerals. Related corporations include those that supply equipment necessary for the production and operation of advanced strategic industry corporations or that build related facilities and infrastructure.
Each sub-fund must invest at least 60% of its committed capital in the primary investment targets, and at least 30% must be invested as new funding for unlisted corporations and KOSDAQ technology-special listing corporations. Among these, the investment ratios in unlisted corporations and technology-special listing corporations are each at least 10%. Investments in KOSPI that qualify as primary investments are limited to within 10%.
Forty percent of each sub-fund's committed capital is allowed for unrestricted investments. Investments in KOSPI, KOSDAQ, and unlisted corporations are all permitted. To prevent stock price manipulation, a system will also be established to receive interim review results from public fund managers.
The Public Participation Growth Fund offers benefits of income deductions by investment amount and separate taxation on dividend income. The income deduction rates by investment amount are 40% for up to 30 million won, 20% for 30 million to 50 million won, and 10% for 50 million to 70 million won, with a maximum deduction of 18 million won. Dividend income is subject to 9% separate taxation for five years from the investment date.
Dedicated accounts can be opened at multiple distributors, and the investment limit is 200 million won over five years. The government plans to set the subscription cap at 100 million won per person per year so more citizens can participate. The minimum subscription limit will be set autonomously by distributors between 0 and 1 million won. Even without tax benefits, those who wish to subscribe can do so through a regular account, with a regular account investment limit of 30 million won per person per year.
The total fee related to management and sales of the Public Participation Growth Fund is about 1.2% annually, and about 1.0% for online subscriptions. The total fee combines the fees of the public fund manager and the sub-fund manager, each around 0.6% annually. The Financial Services Commission (FSC) said the average fee level of 21 general private fund-of-funds public offerings is 1.7% to 2.3%.
The Public Participation Growth Fund is a five-year, redemption-restricted fund and cannot be redeemed early for five years. If transferred within three years after investment, an amount equivalent to the reduced tax will be clawed back. During two of the three weeks of the Public Participation Growth Fund's sales period, 1.2 trillion won, or 20% of total sales, will be allocated as a tranche exclusively for low-income earners. The low-income standard is earned income of 50 million won or less, and if there is comprehensive income other than earned income, 38 million won or less, the same as the requirements for the low-income ISA. Any remaining low-income tranche not sold within two weeks will be offered to the general public in the third week.
To prevent a shortage of branch allotments due to heavy online subscriptions at the start of sales, the Financial Services Commission (FSC) said it plans to manage the first week's online allotment at about 50% of the total 600 billion won on offer.
The Financial Services Commission (FSC) expects to secure 3 trillion won over five years through the launch of the Public Participation Growth Fund.