Financial Authorities Consider Easing Regulations on Public Offering Fund Management

by Hwang Yoonju

Published 11 Apr.2024 11:53(KST)

Consideration of Relaxing Concentrated Investment Restrictions and Expanding Included Assets

Financial Supervisory Service building in Yeouido, Seoul. Photo by Younghan Heo younghan@

The financial authorities are completely overhauling the regulations on public offering fund management. They are considering measures to relax rules prohibiting concentrated investments and to expand the scope of included assets.

According to the financial authorities on the 11th, the Financial Supervisory Service (FSS) held the first meeting of a task force (TF) on the 9th to discuss the overhaul of public offering fund management regulations. The FSS plans to conduct in-depth discussions on the comprehensive reform plan over the next six months and subsequently proceed with revising related regulations. The meeting was attended by seven asset management companies including Samsung Asset Management, Mirae Asset Global Investments, and Shinhan Asset Management, as well as the Korea Financial Investment Association and the Korea Capital Market Institute.

So far, the financial investment industry has continuously raised opinions that the current public offering fund management regulations excessively hinder autonomy, as restrictions are directly stipulated in the Capital Markets Act, and that a review of the overall management regulations is necessary.

A representative criticism is that the regulations prohibiting concentrated investments in the Capital Markets Act are intricately intertwined, making it difficult to establish investment strategies. For example, each fund is not allowed to invest more than 10% of its total assets in the same stock, and asset management companies are prohibited from investing more than 20% of the total assets of all funds in the same stock.

Revisions to the fee structure, including sales commissions, as well as the reorganization or diversification of sales channels, are also expected to be reviewed. Although public offering fund assets, centered on exchange-traded funds (ETFs), have grown at the fastest rate in the past 10 years, asset management companies’ fee revenues have reportedly decreased.

The public offering fund custody assets reached 329.2 trillion won, an increase of 53.7 trillion won (19.5%) compared to the end of the previous year, marking the only nearly 20% growth rate in the past decade. Among these, the net asset value of ETFs surged by 54.3%, from 78.5 trillion won at the end of 2022 to 121.1 trillion won at the end of 2023, driving the growth trend.

The FSS expects that the overhaul of management regulations will lead to higher fund returns, expand investor demand for funds, and strengthen the competitiveness of public offering funds beyond the current level.