Hedge fund to make debut

By Kang Seung-woo

The first local hedge funds are likely to be created earlier than expected, as the nation’s financial regulator plans to go all out to introduce them in Korea.

“In order to speed up the introduction of ‘Korean-style’ hedge funds, I have ordered an amendment to the enforcement decree of the capital market law,” Financial Services Commission (FSC) Chairman Kim Seok-dong said in a seminar on hedge funds held in Seoul on Monday evening.

The FSC had planned to submit a revision bill to the capital market law to parliament in July or August in its effort to spur the creation of local hedge funds.

But instead of overhauling the regulation, the FSC has decided to amend the law’s enforcement decree, which may take two to three months, to save time and head off potential disagreements during the law revision process.

A hedge fund is privately pooled money used by investors to generate high investment returns through risky bets using a wide range of investment strategies, including short selling and leveraged buyouts.

The regulatory change is expected to allow a hedge fund to borrow up to 400 percent of its total assets and to place bets on financial derivatives with the minimum amount of investment by individuals set between 500 million and 1 billion won.

“It is high time that we introduce local hedge funds. I believe that Korea’s manpower in the financial sector will be able to make the most of their ability in dealing hedge funds,” Kim said.

“Despite considerable concern over private equity funds (PEFs) in their introductory phase, the PEF market has grown to the current level worth 30 trillion won and it has recently succeeded in taking over the world’s top golf ball brand Titleist.”

Mirae Asset PEF and Fila Korea, a sporting goods maker, won a bidding contest against Blackstone, a leading asset management firm, and Adidas to purchase Acushnet, the company that owns the Titleist brand, for $1.23 billion.

“Hedge funds will lay a foundation for the nation’s financial industry. I will provide the necessary support to launch them as soon as possible,” he said.

Kim also said that he plans to gather opinions from a variety of fields before introducing the mechanism for creating local hedge funds.