Next Year, 'Up to 4 Trillion Won' New Deal Fund to Be Established... Government to Bear Losses Again

Plan to Announce Naeju Ja Fund Recruitment... Government to Bear 20% Loss

[Image source=Yonhap News]

[Asia Economy Reporter Jang Sehee] The government has announced plans to launch a policy-type New Deal fund worth 4 trillion won in March next year, and to encourage greater public participation, it will bear subordinate losses up to 20% from the budget.

According to the government on the 25th, it will establish a total of 20 trillion won worth of policy-type New Deal funds by 2025 through investments from the government and policy financial institutions, creating New Deal infrastructure funds and private New Deal funds.

The government plans to create a mother fund that plays a catalytic role for private investment through investments from the Korea Development Bank and the Growth Ladder Fund, and decide on sub-funds by matching private funds including those from the general public.

Part of the private investment funds will be used to create a private placement fund with indirect public offerings that the general public can participate in, aiming to raise about 140 billion won next year. Additionally, to provide stable investment opportunities to the public, the government's subordinate investment ratio will be raised up to 20%. This means the government will cover losses up to 20%.

The performance fee payment benchmark rate of return has been lowered from the existing 7% to a maximum of 4% to provide incentives, and the fund operation period can be extended up to 20 years.

To actively encourage private capital participation, the government also proposed structures allowing long-term investment, providing incentives, and mitigating and supporting investment risks.

First, the fund operation period is allowed up to 10 years, but considering investment fields and strategies, areas requiring long-term investment can be set up to 20 years (infrastructure funds). However, even if the fund operation period extends to 20 years, the total management fees will be set so that they do not increase significantly compared to a 10-year maturity fund.

In profit and loss distribution of the fund, incentives selectable by private investors will also be provided. These include priority loss compensation for some losses, priority distribution to private investors of a portion of excess returns attributable to policy funds when excess fund returns occur, and granting private investors the right to purchase part of the policy investment within 5 years at a pre-determined exercise price.

Meanwhile, the government will announce the recruitment for sub-funds next week and receive proposals from fund managers by the end of January next year. Afterwards, it plans to review and select fund managers in February and start fund formation from March.

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