Korea to allow publicly-raised capital into private equity

These are among a series of measures announced by the regulator with a view to encouraging the use of innovative fund products that offer higher yields, Korea JoongAng Daily reported. Capital raised from public sources could also be allocated to active exchange-traded funds.

The FSC said that reforms would give investors the opportunity to diversify their holdings at a time of low interest rates. It noted that Korea trails other markets in terms of exposure to fund products and the creativity of fund products available.

"Being aware of the problems, the FSC has come up with measures to add innovation in a variety of fund products and increase individuals' access to them, considering the changing needs in the current financial market," said Kim Tae-hyun, director-general of the FSC's capital markets division.

Individual access to private equity is limited due to a minimum investment requirement of KRW100 million and a maximum leverage ratio of 200%. The new plans will allow public offering funds to invest at least KRW5 million in private equity vehicles, although no single fund will be able to account for more than 20% of a private equity corpus.

Separately, Jong-Yong Yim, chairman of the FSC, emphasized the regulator's commitment to financial sector reform in an article for The Wall Street Journal. He claimed that significant steps have already been made in terms of streamlining regulations and improving supervisory practices, and promised even more change.

Financial technology and capital markets are particular areas of focus. For the former, the FSC plans to expand supporting infrastructure for fintech companies, following the introduction of crowdfunding for start-ups in January. For the latter, steps will be taken to redress the balance in markets that are weighted towards banks rather than innovative start-ups.

"The structure of the South Korean stock market will be reshuffled to promote competition among exchanges, attracting more listings. Private-equity fund rules will be relaxed so that money can flow to their optimal uses," Yim added, without elaborating further.

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• Topics
• North Asia
• Regulation
• Fundraising
• South Korea