South Korea is trying to turn some of its vast pool of household savings into long term financing for semiconductors, artificial intelligence, batteries, defense and robotics as the global race to fund advanced industries demands ever larger amounts of capital.
The effort is part of a broader 150 trillion won National Growth Fund initiative designed to channel government backed and private capital into strategic industries that require expensive research, factories and infrastructure and can take years to generate returns. Rather than leaving that financing burden entirely to corporations, banks and institutional investors, Seoul is also giving individual investors a way to put their money behind the same industries it considers critical to the country’s economic competitiveness.
That makes the program more consequential than a conventional Korean retail fund offering. The U.S., China and other major economies are pouring capital into chips, AI infrastructure and advanced manufacturing, while Korean companies occupy important positions in several of those supply chains. Samsung Electronics and SK Hynix are among the world’s largest memory chip makers, and Korean companies are also major producers of batteries and increasingly active in defense and robotics. Korea’s approach shows how governments competing in those industries are looking beyond subsidies and corporate balance sheets for the capital needed to keep investing.
The next test begins Sept. 30, when the second round of the Public Participation Growth Fund goes on sale after the first offering sold out ahead of schedule in May.
The Financial Services Commission, Korea’s financial regulator, said about $450 million will be offered to individual investors through Oct. 15 on a first come, first served basis. The offering will close earlier if all available units are sold.
The retail money will be combined with subordinated government support before being distributed among 10 underlying funds. In total, about $447 million from investors and another $89 million in government support will create an investment pool of roughly $536 million.
At least 60% of the capital committed by those funds must be invested in companies and projects connected to advanced strategic industries including semiconductors, secondary batteries, AI, defense and robotics.
The government’s subordinated position is an important part of the structure because it is intended to make it easier for private investors to participate in investments that can require long holding periods and carry greater uncertainty than ordinary savings products. Tax incentives provide another attraction, allowing investors to receive an income tax deduction on investments of up to $134,000 and a separate 9.9% tax rate on dividend income.
Strong demand in the first round has also prompted the government to broaden access for lower income investors. Although only 20% of the first offering was initially reserved for them, the group ultimately accounted for about 35% of the amount sold and 38.8% of subscribers. About 61% of participating investors between ages 19 and 34 also qualified under the lower income criteria.
The second offering will reserve about $223 million, or half of the available amount, for lower income investors during its first week. Any remaining allocation will be opened to all eligible investors beginning Oct. 8.
The fund will be available through 10 banks and 14 securities firms at branches and online. Investors who bought into the first round cannot participate in the second, although people who opened an account for the first offering without investing remain eligible. Participants in this year’s first fund will also be allowed to invest again when new products are offered next year.
The incentives come with restrictions. The fund has a five year maturity and cannot be redeemed early. Investors will be able to sell their holdings after they are listed on an exchange, but limited liquidity could make finding a buyer difficult or cause the units to trade below their underlying value. Selling within three years can also result in the repayment of tax benefits.
Ten Korean asset managers have been selected to deploy the money. DS Asset Management and Korea Investment Value Asset Management will operate the two largest underlying funds, while Brain Asset Management, KB Asset Management, Quad Asset Management and Truston Asset Management will manage four midsize funds. DB Asset Management, NH Hedge Asset Management, Taurus Asset Management and Hana Asset Management will oversee four smaller vehicles.
The early sellout of the first offering suggests the government has found an additional source of capital for its industrial ambitions. If that demand continues, household money could become another layer of financing behind Korea’s attempt to remain competitive in the industries driving the global technology and manufacturing investment boom.
