The second round of Korea's public-participation National Growth Fund, which aims to raise 600 billion won ($430 million), sold more than a third of its target on the first day. Because eligibility was narrowed and the share reserved for low- and middle-income investors was raised, the fund is expected to take longer to sell out than the first round, when investors queued outside branches before they opened.
Sales exceeded 200 billion won on the first day of the offering on the 30th, according to the Financial Services Commission. The 600 billion won fund is available through Oct. 15 at 10 commercial banks and 14 brokerages. During the first five business days, 300 billion won, or 50% of total sales, is set aside for low- and middle-income investors, while online sales are capped at 40% at banks and 60% at brokerages.
The National Growth Fund is a five-year closed-end product that invests mainly in companies in advanced strategic industries. At least 30% of the money raised goes to unlisted companies and firms listed on the KOSDAQ under the technology special listing track. Investors receive an income deduction on up to 40% of their investment and separate taxation of dividend income at 9.9% for up to five years.
When the first round launched, about 87% sold on the opening day and the fund was fully subscribed in five days. This time, there were few signs of investors lining up before branches opened. An employee at a Hana Bank branch in Seoul's Jongno district said inquiries had come in even before sales began in the first round, but that there were no such inquiries this time even during the week leading up to the launch.
As of 3 p.m., the five largest banks — KB Kookmin, Shinhan, Hana, Woori and NH NongHyup Bank — had sold 60.08 billion won of the fund, or about 22.4% of their combined 268 billion won quota. When the first fund launched in May this year, the five banks sold out their entire allotment on the opening day.
Demand for the general tranche, by contrast, held firm. Units sold online through Mirae Asset Securities and Korea Investment & Securities were snapped up in one minute and seven minutes, respectively. Other major brokerages, including Shinhan Securities and Kiwoom Securities, also sold out their online general tranches.
Financial investment industry officials said the early pace reflected restrictions on first-round investors buying into the second fund, along with the increase in the priority allotment for low- and middle-income investors to 50% from 20%. The first fund's return of less than 1% also made investors more cautious, analysts said. An FSC official said sales would rise sharply from the sixth business day, when the priority sales period for low- and middle-income investors ends, and added that with the KOSDAQ market having stabilized recently, many investors interested in long-term investing were expected to sign up.
Kwon Dae-young, vice chairman of the Financial Services Commission, visited the NH NongHyup Bank branch at the Government Complex Seoul on the same day and invested in the fund himself. He said the fund would give the public a meaningful chance to share in the gains from the growth of future strategic industries, while providing companies in advanced strategic industries with the capital they need to grow.
