With accounting uncertainties related to infrastructure funds now resolved, the asset management industry is expected to actively pursue investments. Following the announcement by financial authorities on the results of the 'Discussion on Accounting Challenges for Expanding Productive Finance,' the Korea Financial Investment Association and the asset management sector have decided to step up their investment efforts.
On August 18, Lee Changhwa, Head of Asset Management and Real Estate at the Korea Financial Investment Association (Executive Director), stated, "With the proactive support of the relevant authorities, it has become possible to launch products that can invest in long-term infrastructure projects."
He added, "The Korea Financial Investment Association will work in consultation with financial authorities to support the establishment of fund regulations for the industry, ensuring that perpetual closed-end funds can contribute to revitalizing private investment projects."
Previously, when financial institutions participated in ultra-long-term infrastructure projects through funds, there was concern that valuation gains and losses would have to be reflected annually in profit or loss (FV-PL). This acted as a constraint on capital utilization.
According to data from the top six asset management companies by the number of infrastructure fund formations, the size of infrastructure funds shrank from KRW 2.1 trillion in 2020 to KRW 600 billion in 2024. Among financial institutions, insurance companies, which had a high investment ratio, made no new investments this year.
The Korea Financial Investment Association officially submitted an inquiry to the Korea Accounting Standards Board to resolve accounting uncertainties. The Korea Accounting Standards Board responded that closed-end funds with no fixed maturity can be accounted for by investors as FV-OCI (fair value through other comprehensive income). It is expected that the supply of private capital to infrastructure projects will accelerate through perpetual closed-end funds.
This year, the Ministry of Economy and Finance plans to identify new projects in sectors such as environment, roads, and railways, with a total scale of KRW 18.5 trillion plus alpha, to ensure the timely supply of social infrastructure. If projects that have passed the existing Private Investment Project Review Committee (MinTushim) are funded through perpetual closed-end funds, the process is expected to gain momentum.
It is also anticipated that financial institutions will be able to participate in new types of public offering private investment projects, including: strengthening growth and industrial competitiveness such as artificial intelligence; responding to carbon neutrality and the climate crisis; and addressing regional extinction and promoting balanced regional development, all of which are future strategic initiatives of the new government.
The asset management industry expects to play a role in supplying funds to high-risk investments such as subordinated loans and equity investments by establishing perpetual closed-end funds in which institutional investors, including financial companies, can invest in infrastructure projects.
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