As the stock market rally fuels retail investors' enthusiasm, the Public Growth Fund, launched on the 22nd as a public participation product, is drawing intense interest, with all units selling out immediately 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 held for at least three years, and a structure in which government capital and other funds absorb about 20% of losses first. However, investors should be cautious because funds can 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 launching that day is a financial product that allows the general public to invest in this 150 trillion won policy fund.
The fund raises 600 billion won from the public. It is sold until the 11th of next month, but sales end on a "first come, first served" basis once 600 billion won is raised. For example, if 6,000 people each deposit 100 million won to subscribe to the fund, sales end.
Because of this, major financial firms reported a wave of "sold out" cases right after sales started. As of 10 a.m. that day, online allocations of the Public Growth Fund at major securities firms such as Mirae Asset Securities, KB Securities, and Daishin Securities and banks including Shinhan, Woori, and NH NongHyup were all exhausted.
Mirae Asset Securities said that morning, "With strong customer participation, the online subscription limit for the public participation Public Growth Fund has been fully exhausted." Some said it sold out in three minutes. In the case of Korea Investment & Securities Co., a surge of applicants on the mobile app caused a system error. The error was resolved in 20 minutes.
The Public Growth Fund is formed as a consortium, and the same portfolio applies no matter which of the 10 major selling banks (Industrial Bank of Korea, NongHyup, Shinhan, Woori, Hana, KB, iM Bank, Kyongnam, Kwangju, Busan Bank) or securities firms you use to subscribe. You can also subscribe through 15 securities firms, including KB, NH, Daishin, Meritz, Mirae Asset, Samsung, Shinyoung, Shinhan, iM, Woori, Yuanta, Hana, Korea, Hanwha, and Kiwoom Securities.
You can subscribe via mobile application, branch, or online. However, because some documents must be submitted, a branch "open run" may be more advantageous than mobile or online.
The biggest advantage of this product is its tax benefits. To receive them, you must open a dedicated public participation fund account and subscribe to the fund. If you invest through a general account, you cannot receive the tax benefits.
You can receive income deductions at year-end settlement of 40% of the investment amount up to 30 million won, 20% for 30 million to 50 million won, and 10% for 50 million to 70 million won. Dividend income is subject to a separate 9% tax if held for five years from the investment date.
Anyone who is an adult aged 19 or older, or an earned income earner aged 15 or older, can subscribe to the public participation fund. However, if you were subject to comprehensive financial income taxation even once in the previous three years, you cannot subscribe. To verify whether you are subject to comprehensive financial income taxation, when opening the dedicated account for the first time you must submit a certificate of income confirmation for subscribing to an individual savings account (ISA).
Whether one was subject to comprehensive financial income taxation last year has not yet been finalized, so if you were subject to comprehensive financial income taxation in 2024, it will likely be difficult to subscribe.
The annual subscription limit per person is 100 million won, and up to 200 million won over the next five years. The minimum subscription amount depends on the distributor, but is mostly 1 million won. Some securities firms allow investments starting from 100,000 won.
When losses occur in the public participation fund, government capital bears losses first, up to about 20%. In addition to the 600 billion won in principal from public investors, the government contributes 120 billion won, which is used first to absorb losses if they occur.
Despite significant investor enthusiasm, 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 fund for five years. If you withdraw or transfer assets within three years of investment, the tax reductions you received may be clawed back. In addition, you can only make a lump-sum payment, so installment investing is not possible.