South Korea's Financial Services Commission held a public hearing on July 20 at the Korea Development Bank IR Center in Seoul's Yeongdeungpo District to introduce an ultra-long-term technology investment fund extending fund lifespans to 15 years. Financial Services Commission Chairman Lee Eok-won stated the fund aims to 'align the timeline of technology with the timeline of finance.' The initiative addresses a structural challenge in South Korea's venture capital ecosystem, where standard 8-year fund durations force premature exits before portfolio companies reach maturity, according to industry representatives at the hearing attended by Korea Development Bank Chairman Park Sang-jin and National Growth Fund Task Force Director Son Young-chae.
Financial Services Commission Structures 880 Billion KRW Annual Fund with 15-Year Duration
The ultra-long-term fund will be structured as an annual 880 billion KRW allocation divided into large, medium, and small funds selecting 6 sub-fund managers. Policy funding accounts for 680 billion KRW of total resources. The fund's 15-year duration represents a departure from conventional venture capital timelines in South Korea.
To increase general partner (GP) participation, the Financial Services Commission set the internal rate of return (IRR) threshold at 5%, lower than the 7% benchmark for existing policy funds. The commission relaxed non-compete clauses, permitting fund managers to establish competing funds after exhausting 50% of committed capital (reduced from the previous 60% threshold). Incentive structures were expanded to attract fund managers.
For limited partner (LP) participation, the commission introduced mechanisms transferring a portion of excess returns from the advanced technology fund to LPs when fund performance exceeds benchmark returns. The government will provide subordinated capital support up to 40% of LP commitments. LP replacement provisions activate 10 years after investment completion or at fund maturity, whichever occurs first.
Venture Capital Managers Welcome Initiative, Request Regulatory Adjustments
Panel discussion participants from South Korea's venture capital industry expressed support for the ultra-long-term fund structure. Hong Won-ho, CEO of SV Investment, stated: 'There are companies with the potential to become global leaders technologically, but we had concerns about whether our existing funds could stay with these companies until the end. Operating with typical 8-year maturity funds, we had no choice but to pursue IPOs or exit through sales before companies fully matured. The introduction of this ultra-long-term fund is timely.'
The panel included Kim Hyun-chul (S Ventures CEO), Ahn Shin-young (Acestone Ventures CEO), Park Se-geun (Aju IB Investment Executive Director), Ha Geon-hyung (Shinhan Investment & Securities Team Leader), Kim Hyun-chul (Todak CEO), and Park Jae-hong (Wnastella CEO).
Industry Representatives Propose Evaluation Reform and Personnel Regulation Relaxation
Hong Won-ho recommended transitioning evaluation methods for 15-year funds beyond exit-based metrics: 'From a GP perspective, we need to be evaluated on 15-year ultra-long-term funds, but rather than being evaluated only at the point of exit, we need an institutional foundation that can assess technology growth and other factors.'
Kim Hyun-chul of S Ventures raised concerns about personnel restrictions: 'Certain funding institutions include provisions preventing lead fund managers from creating other funds until 60% of committed capital is exhausted. We hope this type of constraint will not apply to ultra-long-term funds.'
Park Se-geun addressed limitations on primary investment targets restricted to common stock and non-redeemable preferred stock: 'When making investments, co-investment situations are common, and there are equity issues. From a technology company's perspective, receiving investments with divided preferred stock types can be procedurally burdensome. If there were provisions excluding cases of short-term exits from primary investment targets, restricting investments to common stock or preferred stock without redemption rights seems to complicate procedures.'
Ahn Shin-young proposed incentives for manufacturing sector investments requiring longer maturation periods: 'If a general company takes 13 years from founding to listing, manufacturing takes 15 to 17 years. If there were bonus incentives for manufacturing investments, it could help companies facing growth difficulties.'
Fund Announcement Scheduled for Late July or Early August
Following the panel discussion, Chairman Lee Eok-won stated: 'We will continue to gather opinions and work toward creating a more complete version.' The ultra-long-term fund investment project announcement is planned for late July or early August following the public comment period.
FAQ
What is the duration of South Korea's new ultra-long-term technology investment fund announced on July 20?
The fund extends the lifespan to 15 years, compared to the standard 8-year duration of conventional venture capital funds in South Korea. Financial Services Commission Chairman Lee Eok-won stated the extended timeline aims to 'align the timeline of technology with the timeline of finance' and allow funds to 'grow with companies over a long period.'
How much funding will South Korea allocate annually to the ultra-long-term technology investment fund?
The fund will be structured as an annual 880 billion KRW allocation, with 680 billion KRW coming from policy funding. The fund will be divided into large, medium, and small funds selecting 6 sub-fund managers. The internal rate of return (IRR) threshold was set at 5%, lower than the 7% benchmark for existing policy funds.
