The National Growth Fund, which sold out in five days, is preparing a second round. In response to demand that far exceeded expectations, the government is moving to supply additional units, with the second fund expected to be launched as early as September.
The Financial Services Commission is collecting feedback on additional supply plans from the banks and securities firms that participated in the first sale. After the first sale concludes on the 11th, the commission is expected to announce the second sales plan. Once the supply amount and distribution method are finalized, a public offering will be conducted, and the second fund is likely to be introduced around September.
The first round was record-setting. The National Growth Fund, launched with a scale of 600 billion won, had already sold 87% of its offering on the first day and was completely sold out on the fifth business day, last month on the 29th. Financial Services Commission Chairman Lee Eok-won formally announced the second tranche during a YouTube broadcast on the 30th of last month.
◆ What drove the sellout: taxes and a safety net
The National Growth Fund offers subscribers a tax deduction of up to 40%. It also includes a safety mechanism in which the government budget absorbs part of any losses first. The combination of tax benefits and loss buffering created conditions rarely seen by investors.
The structure of the fund is as follows: 600 billion won contributed by the public, plus 120 billion won in government funds, are pooled into a parent fund and then invested through 10 sub-funds. The money is directed toward promising companies in advanced strategic industries. The idea is for the public to invest in future industries and share in the returns.
Market conditions also fueled demand. As stock indices rose sharply and investor enthusiasm heated up, funds quickly poured in once a product backed by tax incentives and government support appeared.
◆ The challenge of being a “fund for ordinary people”
Behind the strong sales lies a fairness debate. The government allocated 20% of the total offering to ordinary people earning 50 million won or less in labor income, or 38 million won or less in comprehensive income. In fact, ordinary people accounted for 38.6% of all subscribers, far exceeding the target.
Demand has been confirmed, but issues have also emerged. There are concerns that tax benefits and fiscal support could ultimately favor wealthier investors with disposable capital. That is why a plan to increase the share allocated to ordinary people in the second round is under review. In other words, the question of who the fund is really for still needs an answer.
The sales format is also expected to be revised. In the first round, bank branch allocations were exhausted within two days, while offline allocations at securities firms with fewer branches remained unsold for five days. A shift toward expanding online sales at securities firms and increasing branch allocations at banks is being discussed. To improve convenience, authorities are also considering replacing the certificate of income verification required when opening an Individual Savings Account with an electronic verification system.
◆ Variables of speed and funding
The key issues for the second round are speed and money. It takes two to three months just to select new sub-fund managers for the investments. To save time, one option under discussion is to keep the parent fund unchanged and reselect only the sub-funds.
Securing funding is another hurdle. The government budget used in the first round was 120 billion won. How to finance the second tranche will determine its scale. The final size is expected to be decided after considering both additional tax deductions and fiscal capacity.
The second test for the National Growth Fund is not simply about increasing the amount available. Its success will depend on how well the momentum of the first round is channeled toward ordinary people and future industries.