National Growth Fund sells out on day one, raising 5.2 trillion won; additional supply considered

The 'National Participation National Growth Fund,' a new investment vehicle targeting strategic industries, experienced overwhelming demand, selling out on its first day of offering. Approximately 5.223 trillion won (87.1% of the 600 billion won available) was subscribed by investors through online and offline channels, primarily banks. This rapid sell-out has prompted financial authorities to consider a second-half supply increase.

The fund, launched with an initial target of 600 billion won for the year, is part of a larger five-year plan to raise a total of 3 trillion won from the public. The structure involves creating a master fund through public subscriptions and government financial contributions, which then invests in various sub-funds. The government's role includes providing a subordinate investment, necessitating coordination with ministries like the Ministry of Economy and Finance and the Ministry of Planning and Budget for additional funding and tax benefits.

Demand significantly exceeded expectations, particularly among retail investors. The fund had allocated 20% of its initial offering for 'ordinary income' subscribers (those earning under 50 million won annually or 38 million won in comprehensive income), but this segment accounted for nearly 40% of the total subscriptions, estimated at around 100 billion won. This high participation from less affluent investors has fueled discussions about expanding the fund's scale, with President Lee Jae-myung having previously suggested that 3 trillion won over five years was too modest.

While the fund offers attractive benefits, including up to a 40% income tax deduction and a government guarantee covering 20% of potential fund losses, it is important to note that it is not principal-protected. The fund has a five-year lock-up period with no early redemption option. Despite this, the strong initial uptake suggests a significant appetite for investment vehicles that support national strategic industries and offer substantial tax advantages.

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You prepared well, but isn't 3 trillion won too small for the National Participation Fund?