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Financial Supervisory Service www.fss.or.kr
December 8, 2011
Registration of Foreign Funds since Financial Investment Services and Capital Markets Act
Registration of Foreign Funds
Since Financial Investment Services and Capital Markets Act took effect in February 2009, the number of foreign funds registered with the Financial Supervisory Commission (FSC) sharply increased from nine in January 2009 to 124 as of end- October 2011.
However, sales of funds have been sharply trending down since the global financial crisis.
*KRW1.9 trillion (end-2008) → KRW1.8 trillion (end-2009) →KRW1.3 trillion (end-2010) →KRW1.0 trillion (end-October 2011)
Registration of Foreign Funds
(End of Period)
Category Jan.’09
Dec.’09 Dec.’10 Oct.’11
Number (Cumulative)
Growth (rate)
Number (Cumulative)
Growth (rate)
Number (Cumulative)
Growth (rate) For non-
professional investors
9 9* - 21 12(133%) 31 10 (48%)
For professional
investors - 7 7(-) 45 38(543%) 93 48(107%)
Total 9 16 7(78%) 66 50(313%) 124 58 (88%)
*Now registered pursuant to Financial Investment Services and Capital Markets Act, previously registered in accordance with the former Indirect Investment Asset Management Business Act
**Growth (rate) compared with the previous term
Trends
As registration of foreign funds for professional investors became mandatory and the regulator considered the introduction of Korean hedge funds, the number of foreign funds registered sharply increased.
Under the former Indirect Investment Asset Management Business Act, foreign funds for professional investors were not mandated to be registered for sale in domestic markets.
By type of funds, hedge funds were 44 out of total 93 funds for professional investors, accounting for 47%. Private equity funds, securities funds, real estate funds and special asset funds were divided evenly among the rest.
Press Release
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Financial Supervisory Service www.fss.or.kr
Funds for non-professional investors (public subscription) numbered 31 and UCIT funds, open-end securities funds, accounted for 94% at 29.
Foreign Funds by Type
Category
Professional investors Non-professional investors Total Hedge
fund PEF Securities Real estate
Special
asset Subtotal UCITS (Securities)
Other
(Securities) Subtotal Number
(Share, %) 44 (47.3)
13 (14.0)
12 (12.9)
12 (12.9)
12 (12.9)
93 (100.0)
29 (93.5)
2 (6.5)
31
(100.0) 124
Looking at countries in which funds were set up, all 93 funds for professional investors were registered in tax-havens as of end-October 2011.
Out of 31 funds for non-professional investors, 22 funds were formed in Luxemburg, accounting for 71%. The rest 9 funds were registered in Ireland, Germany and Hong Kong.
Foreign Funds by Country
Category
Professional investors Non-professional investors
Total Cayman
Islands
Delaware,
US Luxemburg Other Subtotal Luxemburg Ireland
Germany, Hong Kong
Subtotal
Number (Share, %)
52 (55.9)
13 (14.0)
8 (8.6)
20 (21.5)
93 (100.0)
22 (71.0)
6 (19.4)
3 (9.7)
31
(100.0) 124
Amid rising interest in funds of hedge funds due to the introduction of Korean hedge funds, investors’ demand for hedge funds to be registered is expected to grow in the future.
And attempts to facilitate cross-border sale of funds around the world are likely to continue through the introduction of ETF cross-listing* and fund passport**.
*Asian countries are pushing ahead with cross-listing of ETF.
**Australia, Singapore and Hong Kong proposed at the APEC meeting in November 2011 to liberalize the sale of funds across the border in Asia.
Future Supervisory Direction
The FSS will overhaul regulations or requirements that are not in line with global regulations and put burden on foreign asset management companies and suggest the revision of laws and regulations to the FSC.
The FSS will allow online application and computerization of registration process to reduce inefficiency and implement a sales management system to monitor the trends of foreign fund sales.
The regulator will also publish an English version of the manual for fund registration to enhance understanding of Korean regulations on fund.
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Financial Supervisory Service www.fss.or.kr
Contact Person:
Soomi Kim
Foreign Press Spokesperson Public Affairs Office
Financial Supervisory Service Tel: +82-2-3145-5803
Fax: +82-2-3145-5808 E-mail: soomi.kim@fss.or.kr
