Minimum Investment Amount for Private Equity Funds... Strengthened from 100 Million to 300 Million Won by the End of This Month

[Asia Economy Reporter Park Jihwan] The enforcement decree raising the minimum investment amount for private equity funds by general investors from 100 million KRW to 300 million KRW is expected to be applied as early as the end of this month.

According to the financial sector on the 5th, the Ministry of Government Legislation is currently reviewing the amendment to the Enforcement Decree of the Act on Capital Market and Financial Investment Business (Capital Market Act) containing this content.

This is a procedure following the legislative notice of the amendment in January based on the 'Comprehensive Improvement Plan to Strengthen Protection for Investors in High-Risk Financial Products' finally announced by the Financial Services Commission in December last year.

According to the amendment, from now on, general investors must invest at least 300 million KRW (at least 500 million KRW for funds with leverage over 200%) when investing in professional private equity funds (hedge funds). This is due to repeated side effects such as cases where investors without the capacity to bear losses put all their assets in after the minimum investment amount was lowered from 500 million KRW to 100 million KRW in 2015.

The amendment also establishes a method to determine the identity of funds based on the similarity of the fund's underlying and operating assets and profit and loss structure. This is to block the evasion of public offering regulations by splitting public funds with more than 50 investors into smaller private equity funds for sale.

Following the overseas interest rate-linked derivative-linked products (DLF) and Lime incidents that caused large-scale losses, several private equity fund system improvement measures were announced, but many parts have not yet undergone legislative procedures for implementation.

A Financial Services Commission official explained, "The schedule is inevitably delayed due to drafting work, consultations with the National Assembly and related agencies, and review of the bill."