Seven comprehensive financial investment firms in Korea, obligated to supply venture capital as operators of Integrated Management Accounts (IMA) and short-term note businesses, injected nearly 10 trillion won ($7.3 billion) into venture capital by the end of the first quarter this year. The government and the financial investment industry plan to swiftly implement measures such as supplying liquidity to the exit market and building a venture capital brokerage platform to further strengthen the industry's venture capital capabilities.
According to the Financial Services Commission (FSC) on Monday, the seven comprehensive financial investment firms — Korea Investment & Securities, Mirae Asset Securities (006800.KS), NH Investment & Securities (005940.KS), KB Securities, Hana Securities, Kiwoom Securities (039490.KS), and Shinhan Securities — supplied a combined 9.8753 trillion won in venture capital as of the end of the first quarter. This represents an increase of 2.0173 trillion won over three months from 7.858 trillion won at the end of the fourth quarter last year. The figure reflects a standard that recognizes only up to 30% of the venture capital supply obligation for investments in bonds rated A or below and mid-sized enterprises.
The venture capital supply ratio stands at 17.3% against the 57.1864 trillion won raised by the seven firms through short-term notes and IMAs by the end of the first quarter. The government previously mandated that comprehensive financial investment firms supply venture capital equivalent to 25% of their short-term note and IMA funding — to be raised in stages by 2028 — and all seven firms exceeded this year's mandatory supply ratio of 10%.
By investment target, mid-sized enterprises accounted for the largest share at 4.5 trillion won, followed by Primary Collateralized Bond Obligations (P-CBO) at 2.3 trillion won, small and venture enterprises at 2.1 trillion won, and bonds rated A or below at 1.4 trillion won.
The FSC and the financial investment industry formed a venture capital capability enhancement council on Monday to expand funding for small and venture enterprises and invigorate the venture capital market. The council will meet quarterly to discuss key issues and improvement measures. As a first step, the industry plans to develop a joint plan by next month to supply 1 trillion to 2 trillion won in liquidity to the exit market, which is currently skewed toward initial public offerings (IPOs). A secondary fund structure is considered the most likely format.
The FSC announced it will build a venture capital brokerage platform by July to connect innovative companies seeking funding with institutional investors, including securities firms and venture capital (VC) firms, that provide capital. Ahead of the designation of the sixth batch of securities firms specializing in small and medium-sized enterprises next month, the FSC will also extend the designation period from two to three years, increase the number of designated firms from eight to 10, and strengthen incentives for these specialized firms. Measures include Korea Securities Finance extending the maturity of securities-collateralized loans for these firms from the current maximum of one year to three years, supporting medium- to long-term funding supply.
"The reason for the existence of the securities industry and the first step toward productive finance is to identify growth potential hidden behind risk and create new added value," FSC Vice Chairman Kwon Dae-young said at the council's first meeting. "The industry must identify the tasks required by Korea's capital market and fulfill its role."
