SOUTH KOREA Law and Practice Contributed by: Dongwook Kang, Chris Kim, Seung-Wan Chae and Jongwoo Kim, Bae, Kim & Lee LLC
Bae, Kim & Lee LLC Centropolis B 26 Ujeongguk-ro Jongno-gu
Seoul 03161 South Korea
Tel: +82 2 3404 0000 Fax: +82 2 3404 0001 Email: bkl@bkl.co.kr Web: www.bkl.co.kr
1. General 1.1 General Overview of Jurisdiction
eligible investors by way of private placement. There is no separate classification for funds investing in alternative assets. However, since most of the funds investing in alternative assets are established as pri - vate funds, the terms “alternative investment funds” (AIFs) and “private funds” will be used interchange - ably in this chapter. Under the FSCMA amendment, which took effect on 21 October 2021, private funds are further classified into two types: • privately offered collective investment schemes available for all investors (General Private Funds or GPFs); and • privately offered collective investment schemes available only for institutional investors (Institutional GPFs can be established using various types of legal structures. In practice, the most common form of GPF is an investment trust, which has the following fea - tures: • trust is formed by a trust agreement between a collective investment management entity licensed to manage GPFs (a GPF manager) and a company licensed to engage in trust business (a trustee is typically a local bank or a securities company); • investors invest in the fund by purchasing trust units of the investment trust at their base price (net asset value per trust unit); Private Funds or IPFs). General Private Funds
Alternative investments are attracting a significant pool of local wealth, including sovereign wealth and pensions, and investment by high net worth individu - als and family offices. The growth of Korean inves - tors’ overseas allocations is outpacing that of their domestic allocations, driven by limited opportunities in their own jurisdiction and a thirst for higher returns. Fund managers are extending into new locations, with South Korea being an attractive destination for finding new investors. 1.2 Key Trends Regulators have focused on enhancing protection for investors, especially for retail non-professional inves - tors while relaxing regulations on the operational requirements and restrictions for private funds, par - ticularly for Institutional Investor Funds, in the area of operational flexibility required to maximise private funds’ potential to provide much-needed risk capital to revitalise South Korean capital markets. 2. Funds 2.1 Types of Alternative Funds and Structures Under the Financial Investment Services and Capital Markets Act of Korea (FSCMA), collective investment schemes or funds are classified into public funds and private funds, depending on whether the fund is offered to investors by way of public offering (ie, investment solicitations vis-à-vis more than 49 pro - spective retail investors) or if it is offered to certain
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