Wide Opening
The Korean government will allow not only asset management and investment consulting firms, but also every securities firm to get a license for private equity fund (PEF) business.
Under the circumstances, the domestic PEF market is expected to grow from 3 trillion won or so to at least 5 trillion won in size between this year and 2016, with the number of firms allowed to run PEFs skyrocketing from 21 to about 130.
During the revision of the Capital Markets Act in July this year, it was predicted that asset management firms and investment consultants would be the main entities to expand their business to cover PEFs. However, the Financial Services Commission recently removed the entry barrier for the benefit of securities firms as well. The commission is planning to implement the change late this year after preparing guidelines for the prevention of conflict of interests. Major securities companies are already making preparations to set foot in the industry.
According to the revised bill, a PEF requires 49 or less investors’ funds to be invested in securities, real estate, special assets and the like, and a PEF management firm can be registered when the requirements of minimum equity capital of 2 billion won (US$1.7 million), at least three professional operators and a physical system comparable to that of a public offering fund management firm are satisfied. As of now, 84 asset management firms have completed their reports for switchover.