"Even If I Lose My Investment, the Government Will Cover It"... The Fund Attracting Retail Investors' Attention [Weekend Money]

Sales of the 600 Billion Won National Growth Fund for Citizen Participation Begin on May 22

Photo by Getty Images Bank

Interest in the “National Participation-Type National Growth Fund,” which will begin sales in the financial sector at a scale of 600 billion won starting on the 22nd, is growing in the market. Experts predict that the fund will attract significant attention from investors, citing various advantages such as loss coverage and tax benefits.

According to Shinhan Investment Corp. on the 16th, the National Participation-Type National Growth Fund offers numerous advantages, making it worth active consideration for people seeking tax benefits.

The National Participation-Type National Growth Fund is a product proposed by the government as part of its plan to create a 150 trillion won National Growth Fund over the next five years, aiming to allow individual investors to share in the returns. Of the 30 trillion won to be raised for the National Growth Fund this year, 7 trillion won will be allocated to indirect investment, with the goal of raising 720 billion won—consisting of 600 billion won from public subscription and an additional 120 billion won from government finances.

AI Generated Image

Shinhan Investment Corp. identified the fund's three main merits as follows: ▲ the government covers up to 20% of losses ▲ tax deduction of up to 40% ▲ and dividend income being subject to separate taxation.

First, the structure of the National Participation-Type National Growth Fund is differentiated from that of general public offering funds. The 600 billion won public subscription fund in which investors participate serves as the master fund and is diversified into 10 sub-funds. In addition, 120 billion won in government funding participates in each sub-fund as a subordinated investor, covering losses up to a maximum of 20%.

For eligibility for tax deductions, investors must not have been subject to the comprehensive financial income taxation in the previous three years and must subscribe to the product through a dedicated account. Although not a formal requirement, there is additional incentive to join if the tax deduction comprehensive limit of 25 million won has not been used up. In terms of tax benefit structure, the highest deduction rate applies to the investment segment up to 30 million won. Therefore, while investors can contribute up to 70 million won to maximize the deduction amount, 30 million won is considered optimal for maximizing the return from the deduction. Notably, those with higher tax bases have a greater incentive to participate, as the benefits of the deduction increase with higher taxable income.

The separate taxation of dividend income is also an advantage. This tax treatment, which is the same as that for existing Individual Savings Accounts (ISAs), provides a strong tax-saving effect. Not only does it lower the tax rate (from 15.4% to 9.9%), but it also enables individuals to avoid increases in national health insurance premiums and avoid comprehensive financial income taxation, making it highly attractive to investors.

Of course, there are also concerns. The fund is structured as a closed-end fund with a five-year maturity, meaning early redemption is not possible. Although transfer is possible through stock exchange listing, if investors transfer their holdings before maturity, a significant portion of the tax benefits will be clawed back. There are also concerns about profitability. The structure is similar to that of the New Deal Fund (a four-year maturity closed-end public offering fund with the government covering 21.5% of losses), and there are structural limitations of policy funds as well as a high proportion of investments in unlisted companies and technology exception investments.

Kang Jinhyuk, a researcher at Shinhan Investment Corp., predicted, “It will be especially popular among investors with a high taxable income who can benefit from the deduction, and those who have already maximized ISA, IRP, and pension savings accounts but are seeking additional tax benefits.” He added, “There is a greater incentive to participate for investors who do not expect a correction of more than 30-40% in the domestic market within the next five years and who maintain an optimistic outlook.”

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