Starting in the second half of this year, non-index-linked general public funds will be directly listed on the Korea Exchange and traded like exchange traded funds (ETFs). With increased convenience for investors and reduced sales commissions, expectations are high for the revitalization of the fund market.
On Jan. 3, the Financial Services Commission (FSC) revealed that it conducted a meeting chaired by Vice Chairman Kim So-young to deliberate on “measures to enhance the competitiveness in public funds.” This initiative aligns with President Yoon Suk-yeol’s policy of addressing Korea’s discount, as emphasized by the government.
According to the FSC, the total assets under management for over-the-counter public offering funds, excluding money market funds (MMFs) and ETFs, amounted to 100.2 trillion won (US$76.46 billion) as of the end of September last year. This marked a decrease compared to the 2010 figure of 127.2 trillion won.
Investors tend to avoid public funds due to low returns and relatively complex trading. Asset management companies are also focusing on ETFs, where they can achieve economies of scale and have lower liability.
In order to address these issues, the government has decided to promote the listing and trading of public funds through the financial regulatory sandbox system starting in the second half of this year. When general public funds are listed like ETFs, it is similar to the active ETF structure that pursues active management, and the constraint of being linked to an index disappears.
The government plans to push for the legalization of listed public funds next year. If the law is amended, listed funds will be categorized into passive ETFs with a correlation coefficient requirement of 0.9, active ETFs with a correlation coefficient requirement of 0.7, and newly listed mutual funds with no obligation for index linkage.