South Korea Opens Second $440 Million Growth Fund for AI, Chips and Private Companies

South Korea is launching a second 600 billion won ($440 million) Public Participation Growth Fund, giving individual investors access to a government-backed investment program targeting artificial intelligence, semiconductors and other strategic industries after the first vehicle was rapidly subscribed earlier this year.

Subscriptions for the five-year closed-end fund are scheduled to run from Sept. 30 through Oct. 15. The offering is the same size as the first 600 billion won fund launched in May, which was almost entirely subscribed within days.

The second offering extends South Korea’s effort to channel household savings toward growth companies while using government capital to absorb an initial layer of investment losses. It also represents an unusual model for widening individual-investor participation in growth equity and venture-style investments normally dominated by institutional capital.

Government capital provides a first-loss buffer

Retail capital will be allocated across 10 underlying funds managed by 10 asset managers, rather than being concentrated with a single investment firm. The underlying strategies will invest in strategic industries including semiconductors, secondary batteries, artificial intelligence, hydrogen, defense and future mobility.

Government funding and capital committed by the asset managers will sit below retail investors in the structure and absorb losses first at the individual sub-fund level. The reported first-loss protection amounts to approximately 18.8% to 23.3%, depending on the underlying vehicle.

That structure reduces some downside exposure but does not create a government guarantee. The Financial Services Commission classifies the vehicle as high risk, and investors can lose principal. The regulator has also cautioned that the loss-absorption mechanism applies at the sub-fund level rather than guaranteeing reimbursement of a fixed percentage of an individual’s overall losses.

The structure builds on the first fund, which combined 600 billion won from the public with 120 billion won of government capital. That fiscal contribution was structured as subordinated capital, meaning it would take losses before the senior retail tranche.

The design provides a notable example of public capital being used to crowd private savings into growth investments. PE NEWSWIRE has also tracked efforts to widen access to alternative assets elsewhere, including SEI and Carlyle’s push to expand private-markets access for wealth and retirement investors.

First fund’s rapid take-up drives second offering

Demand for the first South Korean fund provides the clearest rationale for launching another vehicle so quickly.

About 597.1 billion won, or 99.5% of the original 600 billion won offering, had been subscribed within three days of its May launch, according to reporting based on Financial Services Commission data. The first vehicle was subsequently fully subscribed.

For the second fund, South Korea is increasing the amount initially reserved for lower-income investors.

Half of the offering will be reserved for qualifying lower-income investors during the first five business days, compared with 20% of the first fund. Any remaining allocation can subsequently become available to the broader investor base.

The fund will be distributed through 10 banks and 14 securities firms, with subscriptions available through branches and online channels.

Investors in the first fund are barred from participating in the second offering, a restriction that broadens the potential pool of individual participants rather than allowing previous subscribers to accumulate additional allocations.

Tax incentives compensate for five-year lockup

The program combines the first-loss structure with tax incentives intended to make long-term growth investing more attractive to households.

Eligible investors can receive income-tax deductions of as much as 40% on qualifying investment amounts, while dividend income is subject to a preferential 9.9% tax rate, which provides the latest subscription details and investor conditions.

Retail capital is being directed toward strategic industries

The broader policy objective is to provide long-duration capital to industries South Korea considers strategically important.

Under the framework established for the first fund, at least 60% of each underlying vehicle’s capital was required to target advanced strategic industries. The program included explicit allocations to unlisted companies and technology-focused KOSDAQ businesses, creating a channel through which retail savings can ultimately reach companies outside traditional large-cap public markets.

That approach differs from the typical expansion of private-market access through wealth-management platforms. Instead of relying solely on global private equity managers to package institutional strategies for affluent individuals, South Korea is combining retail money, government subordinated capital, professional asset managers and tax incentives in a nationally coordinated investment structure.

The initiative comes as Asian private capital markets attract increasing institutional allocations. PE NEWSWIRE recently reported that India’s private equity and venture capital fundraising reached a record $23.7 billion in 2026, driven partly by large Asia-focused funds investing across markets including South Korea.

The second Korean fund nevertheless carries a different risk profile from conventional savings products. Investors face a five-year holding period, exposure to growth-oriented companies and no principal guarantee.

Its significance for private markets lies in the funding structure: South Korea is effectively using public capital as a junior layer to mobilize 600 billion won of household investment toward strategic growth sectors for a second time in less than six months.