By Kim Jae-kyoung
Staff Reporter

South Korean individuals will be able to set up small-size private equity funds (PEFs) from next year by collecting funds from a pool of retail investors, the Ministry of Finance and Economy (MOFE) said.

The move is part of a set of measures announced by the ministry on Friday to boost the local asset management market.

Under the measures, individuals will be allowed to raise 1 to 2 billion won in funds from a group of private investors to establish PEFs that will be invested in film and other culture industries.

Currently, only asset management firms are licensed to establish these kinds of private funds.

``The government will ease regulations to spur competition in the asset management industry,’’ said Lim Young-rok, director general for the financial policy department at the ministry. ``With the relations of rules, we expect a number of small film and culture funds to be established next year,’’ he added.

Also, the government decided to adopt the so-called fund sales brokerage system, under which talented fund sales brokers can open their own firms independent from securities firms and banks.

In this case, a customer will have easier access to more investment options, as he or she is able to meet and buy a variety of funds from many asset management firms at one place.

In particular, to induce the establishment of PEFs, the government decided to lower the minimum investment ceiling for PEFs to 1 billion won from 2 billion won for individuals and to 2 billion won from 5 billion won for companies.

Moreover, the government plans to allow the establishment of small funds to invest only in specific assets, such as real estate and financial derivatives. The minimum capital requirement for these funds will be 3 billion won, well below the 10 billion won level for the current management firms.

These deregulation measures will take effect from the first half of next year, the ministry said.

Market experts said that it is essential to develop the local asset management market to realize its financial hub vision and cope with the rapidly aging population.

``As you look at the demographics there is going to be much more savers over time as the population ages,’’ McKinsey & Company Asia Pacific Chairman Dominic Barton said.

``There will be an asset management boom and I think this will create opportunities in financial services,’’ he added.

HanaAllianz Investments CEO Eugen Loeffler said that the Korean asset management market has better chances than ever to realize its big potential.

``It is now up to fund management houses and distributors to seize the opportunity and to establish a new investment culture,’’ he said.

Compared to other advanced nations, the nation has quite a small asset management market, according to the Asset Management Association of Korea (AMAK).

As of last November, the nation’s fund management market had a mere $142 billion in asset under management, compared with the U.S. market, the world’s largest, with $7.62 trillion. France ranked second with $1.18 trillion, followed by Luxembourg with $1.17 trillion and Australia with $546 billion.

kjk@koreatimes.co.kr