The second public participation growth fund (hereinafter referred to as the public participation fund) is expected to launch sales soon. However, whether it will replicate the success of the first fund, which lifted KOSDAQ by nearly 11%, remains uncertain. This is because the KOSDAQ index has recently remained stuck in the low 800s for over a month.
According to the financial investment industry on the 7th, the government is aiming to finalize the sales date of the second public participation fund by the end of this month and is currently coordinating with the financial sector responsible for sales.
The public participation fund is part of the National Growth Fund established to nurture growth companies and other advanced strategic industries. It allows ordinary citizens to directly participate in raising investment capital. The structure is designed so that the government partially guarantees investment risks, and if the fund succeeds, profits are prioritized for public offering investors.
The first public participation fund launched on May 22 with a target of raising 600 billion won and achieved remarkable success, concluding within five business days. Specifically, thanks to the upward trend in the stock market and public interest at the time, banks completed sales in two trading days, while securities firms finished in five trading days.
Around the launch of the first public participation fund, from May 21 for three consecutive trading days, the KOSDAQ index, which houses growth companies, rose by nearly 11%, boosting expectations related to fund formation.
With the first public participation fund gaining popularity, the government decided to advance the originally planned second round of fundraising, scheduled for next year, to take place within this month.
However, ahead of the second fund’s sales, recent expansion in volatility in Korea’s capital market has significantly dampened investor sentiment, creating concerns for both the government and industry. In particular, the KOSDAQ index dropped by more than 20%, falling from the high 1100s at the end of May to the low 800s recently, raising worries about declining interest in domestic stock markets including KOSDAQ. As a result, both the government and industry agree that the incentive to sell the public participation fund, primarily aimed at investing in growth companies, will inevitably be diluted.
Moreover, some investors in the first public participation fund have already incurred valuation losses. With the selection process for entrusted management companies for the second fund delayed beyond expectations, speculation even arose that the second sales schedule might extend beyond this month. Although the sales date is expected to be decided soon, the key issue remains whether it can sustain the success of the first round.
In the financial investment industry, there is a view that the price stability of the first public participation fund’s listed profit-sharing securities, which will be listed on Korea Exchange (KRX) KOSPI on the 9th, could also impact the success of the second fund.
Listed profit-sharing securities allow general public offering funds to be traded before maturity, and the first public participation fund is among those eligible for listing. While industry experts expect trading volumes to remain low even after listing, price stability remains a key concern. If the stock price of the first fund’s profit-sharing securities remains stable after listing, it could signal sustained market confidence in growth companies. However, if significant discount trading continues, investor sentiment may further weaken, casting dark clouds over the success of the second public participation fund.
A securities industry official stated, “Although the first fund was a success, the stock market environment has changed significantly since then, likely raising investors’ expectations and making them more demanding. Therefore, it cannot be ruled out that the second sales round may not generate the same level of excitement as the first.”
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