South Korea launches 16-year fund for long-term tech development

South Korea has initiated a new policy fund aimed at nurturing technology development that requires extended periods for commercialization, such as next-generation semiconductors. This fund offers a maximum investment horizon of 16 years, a significant increase from the typical 8-10 years for existing policy funds.

The Ministry of Economy and Finance announced the recruitment of fund managers on September 20. The plan is to select seven managers by October, raise investment capital, and begin investments by the end of the year. The fund, operating under the National Growth Fund, is intended to provide stable capital to startups focusing on cutting-edge and foundational technologies in areas like semiconductors, bio, and defense.

The total fund size is projected at 880 billion won, with 680 billion won to be sourced from the Advanced Strategic Industry Fund and government finances. The remaining capital will be sought from private investors. The extended duration is a direct response to the challenges faced by companies needing over a decade for technology development, where investors' focus on short-term performance often hinders business operations.

Market observers are keenly watching the fund's reception. The prospect of capital being tied up for over a decade presents a hurdle for investors, and fund managers may also be concerned about potentially low returns before technologies mature. To mitigate these concerns, the Ministry of Economy and Finance has introduced incentives, such as excluding the performance of these long-term funds from evaluations for future policy fund applications. Additionally, measures to support investors in recovering their capital mid-term and transferring it to other investors are under consideration.