The National Participation Growth Fund will be sold through banks and securities firms for three weeks starting on the 22nd. The fund, which will raise a total of 600 billion won, offers an income tax deduction of up to 40 percent within a 1.8 million won ceiling for investments held for three years or more, while dividends are subject to separate taxation at a low rate of 9 percent. If losses occur, the government will cover up to 20 percent through fiscal support. However, as a long-term investment product, it requires a lump-sum payment and prohibits early redemption for five years.
The National Participation Growth Fund includes unprecedented support measures, reflecting its purpose of supplying long-term capital to 12 advanced industries, including semiconductors and artificial intelligence (AI), and sharing the gains with the public. In addition to the rare income tax deduction benefit, 20 percent of the total volume has been allocated preferentially to lower-income households. The five-year lock-up of funds is expected to be partially eased through trading following an exchange listing.
What must not be overlooked, however, is that the National Participation Growth Fund is essentially a high-risk product. Sixty percent of the fund's assets will be invested in advanced industries, and more than 30 percent of that will go to unlisted companies or KOSDAQ technology special-listed firms. This means volatility and risk are far greater than for KOSPI investments. While an expected annual return of around 6 percent has been presented, the investment environment and performance five years from now cannot be guaranteed. Still, given high expectations for the growth potential of advanced industries, the fund appears likely to draw strong interest.
The National Participation Growth Fund should be judged by its results rather than by its standing as a policy fund. It is necessary to confront the precedent of the Moon Jae-in administration's New Deal Fund for public participation, whose average internal rate of return (IRR) at maturity was just 2.14 percent, and only 0.75 percent excluding fiscal support. That case clearly showed the gap between policy intent and actual investment performance. For the National Participation Growth Fund to succeed, clear goal-setting along with transparent management and performance oversight is essential. The government must refrain from excessive intervention and fully guarantee the expertise and autonomy of asset management firms. Coordination among the various policy funds being launched in succession since the start of the Lee Jae-myung administration is also needed. Overlapping investments and excessive competition with existing policy funds, such as the Industrial Growth Fund, must be guarded against. Above all, it must not be forgotten that the fiscal resources used to cover fund losses are also taxpayers' money.
