Maturity Bond ETFs to Launch... Introduction of Foreign Currency MMFs

[Asia Economy Reporter Ji Yeon-jin] Going forward, the launch of bond-type exchange-traded funds (ETFs) with maturities will be permitted. Foreign currency-denominated money market funds (MMFs) will also be introduced to assist export companies in managing their foreign currency funds.

The Financial Services Commission announced on the 29th that the revised capital market-related laws, which aim to strengthen the responsibility for fund management and sales and improve returns, as well as allow the introduction of new types of public funds, will take effect from the 30th.

The amended Enforcement Decree of the Capital Markets Act, the Financial Investment Business Regulations, and the Securities Market Listing Regulations include measures to allow the introduction of new types of public funds.

First, the establishment of bond-type ETFs with a set duration (maturity) will be permitted. Bonds inherently have maturities, but bond-type ETFs have not set durations, limiting their ability to meet investment demand seeking stable returns through holding until maturity.

With this system reform, the Financial Services Commission expects that it will be possible to offer asset management products that combine the characteristics of bonds with maturities and the advantages of ETFs, such as diversified investment and real-time trading convenience.

Foreign currency MMFs investing in currency-denominated assets of OECD member countries (including China, Hong Kong, and Singapore) will also be allowed. However, only products denominated in a single foreign currency can be launched.

This measure is intended to meet the demand for foreign currency fund management from export companies and others that constantly generate surplus foreign currency funds. The scope of 100% fund-of-fund public funds, previously allowed only for equity ETFs, will be expanded to allow bond-type ETFs to be 100% included as underlying funds if certain conditions (such as diversification into 30 items) are met.

Accordingly, it will be possible to launch bond-type public funds or ETFs that invest 100% in verified bond-type ETFs listed overseas as underlying funds. Mixed ETFs composed of various assets such as stocks and bonds will be allowed to have the underlying index’s asset composition consist of a total of 10 or more items without distinguishing between types such as stocks or bonds. Previously, they had to be composed of 10 or more items each for stocks and bonds.

Measures to strengthen the responsibility for fund management and sales and to improve investor accessibility are also included. Asset management companies will be required to invest at least 200 million KRW of their own capital when establishing public funds, and performance-linked management fees will be introduced to enhance the responsibility of management companies.

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