Amid a stock market rally, as individual investors' enthusiasm rises, the Public Growth Fund for public participation, launched on the 22nd, is drawing intense interest, with all units selling out right after sales began.
The Public Growth Fund, a policy fund that invests in Korea's core industries, spread by word of mouth thanks to tax benefits that allow income deductions of up to 40% of the investment amount (up to 30 million won) for investments of at least three years and a structure in which government capital and other funds cover up to about 20% of losses first. However, investors should be cautious because funds may be tied up for a long period, and the product does not guarantee principal.
The Public Growth Fund is a 150 trillion won policy fund created by the government to foster 12 advanced strategic industries, including artificial intelligence (AI) and semiconductors. The public participation Public Growth Fund launched that day is a financial product that allows ordinary citizens to invest in the 150 trillion won policy fund.
This fund raises 600 billion won from the public. It is on sale until the 11th of next month, but it is "first come, first served," ending when 600 billion won is raised. For example, if 6,000 people each deposit 100 million won to subscribe to the fund, sales will end.
Because of this, cases of selling out right after sales began poured in at major financial firms. As of 10 a.m. that day, all online allotments of the Public Growth Fund had been exhausted at major securities firms such as Mirae Asset Securities, Korea Investment & Securities Co., KB Securities, and Daishin Securities, and at banks including Shinhan, Woori, and NH NongHyup.
Mirae Asset Securities said that morning, "Amid strong participation from customers, the online subscription limit for the public participation Public Growth Fund has been fully exhausted." Some even said it sold out in three minutes. Korea Investment & Securities Co. also sold out the working-class product in less than 10 minutes after sales began. The standard product also sold out within 20 minutes.
The Public Growth Fund is formed as a consortium, and the same portfolio applies regardless of whether one subscribes through one of the 10 selling banks (IBK, NongHyup, Shinhan, Woori, Hana, KB, iM Bank, Kyongnam, Kwangju, and Busan Bank) or through a securities firm. Subscriptions are also available at 15 securities firms, including KB, NH, Daishin, Meritz, Mirae Asset, Samsung, ShinYoung, Shinhan, iM, Woori, Yuanta, Hana, Korea, Hanwha, and Kiwoom Securities.
Subscriptions are available via mobile applications, branches, and online. However, because documents must be submitted, a branch "open run" may be more advantageous than mobile or online.
The biggest advantage of this product is the tax benefit. To receive the tax benefit, investors must open a dedicated public participation fund account and subscribe to the fund. If investing through a regular account, tax benefits are not available.
For up to 30 million won, 40% of the investment amount is deductible; for 30 million to 50 million won, 20%; and for 50 million to 70 million won, 10% can be deducted at year-end tax settlement. Dividend income is subject to a 9% separate tax if five years have elapsed from the investment date.
Anyone age 19 or older, or anyone age 15 or older with earned income, can subscribe to the public participation fund. However, if the person was subject to comprehensive taxation on financial income even once in the previous three years, they cannot subscribe. To confirm whether the person is subject to comprehensive financial income taxation, when first opening the dedicated account, they must submit an income verification certificate for Individual Savings Account (ISA) subscription.
Whether a person was subject to comprehensive taxation on financial income last year has not yet been finalized, so if they were a comprehensive financial income taxpayer in 2024, subscription is expected to be difficult.
The annual subscription limit per person is 100 million won, with a maximum of 200 million won over the next five years. The minimum subscription amount varies by distributor but is mostly 1 million won. Some securities firms allow investments starting from 100,000 won.
If losses occur in the public participation fund, government capital covers losses first, up to around 20%. In addition to the 600 billion won in principal from public investors, the government contributes 120 billion won, which will be used first to cover losses if they occur.
Although investor enthusiasm is strong, this product does not guarantee returns. Remember first that it is a high-risk product with no principal guarantee.
Also keep in mind that it is a fully closed-end, five-year fund. If assets are withdrawn or transferred within three years of investment, the tax amount that was reduced may be clawed back. In addition, contributions can be made only as a lump sum, so installment investing is not possible.