Principle Changed
The Financial Services Commission and the Financial Supervisory Service of South Korea announced on February 5 that their principles to promote adjusting the small-scale funds and restricting the release of new small-scale funds will remain effective with some changes until February next year.
The principles were put into effect in June 2015 so that one-year-old or older funds worth less than five billion won (US$4.27 million) can be trimmed off. The ratio and number of such funds in the local market fell to 7.2% and 126 until the end of last year, respectively.
In the interest of the efficiency of the regulations, the financial authorities have restricted the registration of a new fund by an asset management firm with a ratio of small-scale funds of 5% or more. Still, the regulations have not been applied to smaller firms where the number of small-scale funds is five or less and the number of public offering funds allowing additional investment is 10 or less. This exception clause, however, has resulted in a side effect in the form of some of the smaller firms continuing to release new funds in spite of a ratio of small-scale funds of over 80%.
Under the circumstances, the financial authorities modified the clause at this time to two or less small-scale funds instead of five. This change in the regulations has led to a decline in the number of asset management firms subject to the new fund launching restriction from 18 to 14. Specifically, Korea Value Asset Management, Macquarie Investment Management, Truston Asset Management, Franklin Templeton Investments, Yurie Asset Management, Schroder Investment Management and Plus Asset Management are now free from the regulations whereas HDC, Pine Asia Asset Management and KOREIT Asset Management are newly subject to the restriction.