Micro investment to become possible for private equity funds of funds in Korea

2019.10.02 13:44:19 | 2019.10.02 13:44:47

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More diverse-scaled private equity funds will become available in Korea through removal of minimum ceiling so that retailers can invest in unlisted private companies with as little as $10.

The Financial Services Commission, Korea’s top financial authority, on Tuesday said the Cabinet passed the amendments to financial market laws, which include removing the minimum 5 million won ($4,155) limit to invest in private equity fund of funds.

A private fund of funds is a pooled investment fund that invests in smaller private funds such as mutual funds or hedge funds. Public trading of the financial product is possible in Korea but there has been a minimum investment requirement of 5 million won after the government set the lower limit in May 2017 to prevent against reckless investment practices. Such regulations, however, have often been criticized to impede financial market’s growth.

Following the change in related law, retail investors will be able to make micro investment in private or hedge funds through a fund of funds. Designing such a fund of funds will be left to each asset managers, which could offer a product with minimum investment requirement of as little as $10.

Market experts said the investors would welcome the change but at the same time advised on further relaxation in regulations related to fund of funds. Asset managers have preferred offering private funds to large investors over selling small public fund of funds due to regulatory complexities, said an asset manager, adding related laws should be relaxed more to bolster the product’s growth.

Currently, there are five publicly offered funds of funds in the country and their combined assets under management amount to just 200 billion won, according to financial industry sources.

By Jin Young-tae and Cho Jeehyun

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