Retail investors have snapped up almost all of a 137 billion-won ($121 million) fund aimed at promoting government-led projects under the Korean New Deal as of Sunday, as individuals seek to take advantage of the state policy fund to use as a financial cushion against losses.
The 137 billion won was earmarked for retail investors out of a larger 200 million-won fund. The 137 billion won was parceled and sold via five major commercial banks on Thursday. The ones offered by the commercial lenders were sold out the day it launched.
KB Kookmin Bank and Hana Bank sold 22.6 billion won and 15.5 billion won to their customers, respectively. NH NongHyup Bank and Shinhan Bank sold funds worth 15 billion won and 11 billion won, respectively as well. Woori Bank trailed behind with 7 billion won.
The five lenders were part of a total of 15 financial institutions -- seven banks and 8 brokerages -- designated by the government as sales channels for the fund.
State-run lender Korea Development Bank also sold all of the products that totaled 1 billion won.
Another state-run institution, Industrial Bank of Korea sold a majority of its share of the fund, selling 19.8 billion won out of 22 billion won, as of Friday. The reason IBK saw slower sales compared with the rest was due to it setting a noticeably lower bar for minimum investment per customer, industry watchers said. It was set at 50,000 won compared with other lenders, which set their minimum investments in the range of 1 million won to around 10 million won.
According to the Korea Financial Investment Association, major brokerages Korea Investment & Securities and Shinhan Investment each sold 14 billion won and some 8 billion-won worth of the fund last month.
The New Deal government policy fund “for the public” is among several funds designed by the government to support firms participating in the Moon Jae-in administration’s New Deal projects. It was designed as a hedge fund of funds, which invests in 10 different child funds in this case. Quintessentially, it would be a high-risk fund investing in the business’ equities and mezzanine securities, but the taxpayers’ money or the state policy fund would be allocated to instruments that have lower priority to cushion 21.5 percent of the principal losses.
The fund is set to reach maturity in 2025 and investors are suspended from redemption until maturity.
President Moon Jae-in, despite “missing his chance” to invest in the fund himself, expressed his appreciation for the popularity of the fund through social media on Thursday.
By Jung Min-kyung (firstname.lastname@example.org