FSC chief calls for greater flexibility in Korean fund structures

Yim Jong-yong, who leads the Financial Services Commission (FSC), the Korean financial regulator, has said he will push to review all regulations around private fund types and their operation.

Marking 10 years since Korea introduced private equity funds as part of an effort to drive Korea’s private capital for corporate and financial restructuring, Jong-yong told delegates at a conference on private equity in Seoul that the reforms made to private equity last year were not enough and that the FSC intends to review all regulations on private equity from scratch.

Under current laws, private equity funds in Korea are divided into two types; management participation and portfolio investment, and fund managers are required to choose only one. However, this division does not exist in advanced economies, such as the US. Jong-yong suggests that Korea should follow suit and give private equity fund managers the ability to choose whatever investment strategy they prefer.

In recent years, market players have asked for freer and more independent operation of private equity funds in the Korean market and the government has assured them that it will give greater discretion and flexibility as to the type of fund and how to operate and manage that fund’s assets.

The push toward the liberalization of private equity funds comes just six months after reforms were made to the Financial Investment Services and Capital Markets Act (FSCMA) to allow companies to invest in funds comprising of any type of asset, as reported by pfm.

Prior to the reforms, the FSCMA restricted fund managers’ investment strategies by classifying private fund types into separate areas. The reform introduced the “private collective investment vehicles for professional investment”, which allows companies to invest in funds comprised of any type of asset and has made it easier for managers to raise funds in the region.

Creating an effective fund set up in Korea would give fund managers more options for the fund structure and greater flexibility on how to operate and manage each fund’s assets, says Eui Jong Chung, attorney at South Korea-based law firm Bae, Kim and Lee, in an interview with pfm.

The government has not yet introduced a timeline to realize Jong-yong’s plan. However, more information is expected in the coming months.