Policy-type New Deal Fund to Launch Early Next Year... Linked Products Including Private ETFs Also Expected

[Sejong=Asia Economy Reporter Kim Hyunjung] The government announced that the policy-type New Deal Fund has started preparatory work this year and will be able to initiate the formation process early next year. The market-driven New Deal Fund, which involves private sector participation, is expected to be launched even earlier, and linked products such as Exchange-Traded Funds (ETFs) are also anticipated to be introduced.

According to the Ministry of Economy and Finance on the 5th, the policy-type New Deal Fund will go through procedures this year, including establishing investment guidelines and criteria for selecting fund managers, and will begin the fund formation process when the government makes fiscal contributions early next year. The Korea Exchange is also expected to release linked products such as ETFs by developing New Deal-related indices, and the market-driven private New Deal Fund is projected to be launched sooner.

Regarding concerns in the market about returns, the government emphasized its commitment to pursuing zero profitability proactively. The Ministry of Economy and Finance stated, "If private New Deal investments are activated through fiscal and tax support for wealth, a virtuous cycle will be formed where better investment opportunities are discovered through accumulated investment experience, leading to higher returns." It added, "Infrastructure investments in data centers and 5G networks, which are not yet active domestically, are already thriving overseas with high returns. In Korea, investments in fields such as renewable energy are beginning in earnest, and related institutional improvements are being made simultaneously, so there is significant potential for improving returns."

[Image source=Yonhap News]

Regarding investment destinations, guidelines will be prepared soon. The Ministry of Economy and Finance said, "The private sector will refer to projects specifically presented in the 160 trillion won-scale Korean New Deal comprehensive plan to judge New Deal-related businesses and companies," adding, "Investments in New Deal-related companies and industries are gaining attention in the financial market, and a ‘New Deal Index’ that tracks listed companies within New Deal-related sectors will be launched shortly."

However, it explained that there will be no additional support measures to guarantee the principal of private investment projects. The Ministry of Economy and Finance stated, "Industrial Infrastructure Credit Guarantees provide guarantees up to 500 billion won per project for public-interest private investment projects, and in cases where private investment projects are canceled midway, the government, which holds ownership, pays part of the private investment funds. Thus, a system to bear the investment risks of private projects is already established," and added, "There are no additional support measures to guarantee the principal of private investment projects."

The priority risk-bearing ratio of fiscal funds when operating the policy-type New Deal Fund was presented at a basic level of 10%. The Ministry of Economy and Finance said, "The risk borne by the public sector varies depending on the nature of the specific investment target and the structure of the fund, but the priority risk-bearing ratio of fiscal funds is around 10%," adding, "However, if additional risk-bearing is necessary depending on the nature of the investment target, the specific risk-bearing ratio will be decided within the total policy funds of 7 trillion won through consultations with policy financial institutions such as Korea Growth Finance and the Korea Development Bank."

This content was produced with the assistance of AI translation services.