Korea's National Participation Growth Fund, which offers income tax deductions of up to 40% on investment amounts, will go on sale to the general public starting Nov. 22. The fund will be created with 600 billion won ($430 million), with an annual subscription cap of 100 million won per person.
The Financial Services Commission (FSC) said Thursday that the fund will be sold on a first-come, first-served basis through the online and offline channels of 25 banks and brokerages from Nov. 22 to Dec. 11.
The fund is structured as a parent fund combining 600 billion won from the public and 120 billion won in fiscal funding, which will invest in 10 sub-funds. More than 60% of the sub-fund capital will be directed to advanced strategic sectors including artificial intelligence (AI), semiconductors, and biotechnology. Of this, 30% will be invested as new capital — including rights offerings and mezzanine financing — in unlisted companies and KOSDAQ technology special-listing firms.
Subscriptions are open to individuals aged 19 or older, as well as wage earners aged 15 or older. Investors can put in up to 100 million won per year, with a five-year maximum of 200 million won. Each seller will set the minimum threshold between zero and 1 million won.
The fund offers significant tax benefits. Investors using dedicated fund accounts for three years or more receive income tax deductions of up to 40%. A 40% deduction rate applies to investment amounts up to 30 million won, 20% for amounts between 30 million and 50 million won, and 10% for amounts between 50 million and 70 million won.
Dividend income from the fund is subject to 9% separate taxation, up to a contribution limit of 200 million won. Contributions can be withdrawn mid-term, with the subscription limit restored upon withdrawal. Wage earners aged 15 or older must submit separate documents verifying earned income at the time of subscription. Investors who do not wish to claim tax benefits can subscribe through general accounts, with an annual limit of 30 million won per person.
Of the 600 billion won, 120 billion won will be allocated preferentially to lower-income earners with earned income of 50 million won or less (or comprehensive income of 38 million won or less). Online sales during the first week will be capped at 50% of total sales volume. "The purpose of the National Participation Growth Fund is to share the fruits of economic growth with the public," an FSC official said. "We set aside a separate allocation for lower-income investors to prevent subscription opportunities from being concentrated among general investors."
If investment losses arise during fund operation, the government will absorb up to 20% of the losses. The measure reflects the fact that ordinary citizens will be investing long-term in venture capital, easing concerns about potential losses for individual investors.
Total fund fees will amount to approximately 1.2% per year (about 1.0% for online sales). This total combines the fees of the public fund operator and the sub-fund operators, each at around 0.6% per year.
Investors should note that the National Participation Growth Fund is a closed-end fund, meaning early redemption is not possible during the five-year term. Shares can be transferred once the fund is listed on the exchange following its establishment, but low liquidity may hamper trading. Transfers within three years of investment will result in substantial recovery of the tax benefits received. "If the five-year cumulative return exceeds 30%, the operators will be allowed to take returns beyond management fees," an FSC official said. "We plan to launch a 600 billion won National Participation Growth Fund every year through 2030."
