Overcoming Venture Winter... Need for a 'Tax-Led' Investment System

"VCT (Venture Capital Trust), a product that invests in venture capital, has gained great popularity among general investors in the UK as a tax-led product. Korea also seems to need the introduction of systems like VCT to overcome the Venture Winter and promote the development of the venture capital market."

Jonathan Dix, Chief Investment Officer (CIO) of Octopus Investments, stated this during a panel discussion titled 'Venture Capital Supply Systems, Operational Cases, and Implications from Various Countries' at the 'International Securities Association Council (ICSA) International Conference' held on the 20th at the Four Seasons Hotel Seoul, hosted by the Korea Financial Investment Association.

He said, "In the UK, about 1,000 companies that received investment through VCT have experienced high growth, creating economic effects such as over 70,000 jobs and an increase in tax revenue of 70 million pounds."

Foreign experts shared successful cases of venture capital supply overseas, such as the US BDC (Business Development Company) and the UK VCT (Venture Capital Trust).

Ko Young-ho, Director of Asset Management Division at the Financial Services Commission, in his presentation, diagnosed that “Although various systems such as accelerators, crowdfunding, venture capital, and private equity exist to supply venture capital in Korea’s venture capital market, recently, due to interest rate hikes, liquidity contraction, and risk aversion, it has become difficult to supply venture capital,” and explained the Business Growth Collective Investment Vehicle (BDC) currently being introduced by the government to overcome this.

In the subsequent panel discussion, Jonathan Bock, CEO of Blackstone’s BDC in the US, explained, “Due to the prolonged downturn of bank syndicated loans recently, demand for direct lending through BDCs has continuously increased, and US BDCs have high growth potential to supply venture capital amounting to 4 trillion dollars (approximately 5,000 trillion won), mainly through direct lending.”

In his closing remarks, Ko Young-ho said, "To overcome the recent contraction of Korea’s venture capital market, we will strive to promptly introduce a Business Growth Collective Investment Vehicle similar to the US BDC and UK VCT," and asked domestic and international capital market participants for special attention.

Meanwhile, Seo Yoo-seok, Chairman of the Korea Financial Investment Association, said, “The Business Growth Collective Investment Vehicle is a system that can revitalize the venture and capital markets, and through collaboration among participants such as securities companies, asset management firms, and venture capital, synergy effects of venture capital supply and corporate growth can be expected,” adding, “Since the US BDC and UK VCT were introduced during periods similar to the current high interest rate and high inflation environment that has contracted venture investment, now is the optimal time for Korea to introduce the BDC.”

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