National Participation Growth Fund Launches on the 22nd... Government to Absorb Up to 20% of Losses First
Three-Week First-Come, First-Served Sale Until June 11
Government Fiscal Investment and Sub-Fund Seeding Absorb Losses First
The National Growth Fund, a citizen participation fund that invests in advanced strategic industries such as semiconductors and secondary batteries, will go on sale starting May 22. The Financial Services Commission announced that the National Participation Growth Fund will be sold on a first-come, first-served basis for three weeks until June 11.
The National Growth Fund pools public capital to create three public offering funds managed by Samsung Asset Management, Mirae Asset, and KB Asset Management. These public offering funds, in turn, invest in ten sub-funds. The total fund formation consists of 600 billion won in retail investment (senior tranche), 120 billion won in government funding as a subordinated tranche, and the seeding investment (subordinated) from the ten sub-fund management companies.
The total amount thus raised is allocated among the ten sub-funds. If the fund incurs losses, the government’s fiscal investment and the sub-fund management companies’ seeding investments will absorb the losses first.
Because the government contributes only 20% of the retail investment as a subordinated tranche, the priority loss absorption ratio of government funds is lower than 20% of each sub-fund’s total size. For example, the government assumes priority losses up to 20% (200 billion won) for a retail investment of 1,000 billion won.
The overall priority loss absorption ratio for all subordinated tranches ranges from 17.5% to 20.5% per sub-fund, depending on the seeding investment ratio of the sub-fund management companies (1–5%).
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At maturity, the fund plans to return a single rate of return to investors, calculated by aggregating the final profits and losses of the ten sub-funds. However, due to various costs incurred by the fund and differences in accounting timing, there may be differences in returns among the three public offering fund managers.
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