"Investing in Private Equity with Just 1 Million Won: Private Equity Feeder Funds Gain Attention Amid Market Volatility" [Investment Barometer]

Public Feeder Funds’ Net Assets Up 10.5% This Year
Private Equity Investments Now Accessible with Smaller Capital
Timefolio Fund Surpasses 1 Trillion Won in Net Assets
Investors Should Note Dual-Fee Structure and Redemption Restrictions

Public feeder funds that have lowered the entry barrier to private equity investments are expanding their presence. Amid growing stock market volatility and increased concentration on a few large-cap stocks, investment capital is flowing in as investors seek to break away from simple index-tracking strategies in pursuit of outperformance.

According to the Korea Financial Investment Association on August 13, the net assets of public feeder funds reached 54.1484 trillion won at the end of last month. This marks an increase of 5.2126 trillion won, or 10.65%, compared to the end of last year (48.9358 trillion won).

Public feeder funds for private equity are products that lower the investment barrier for retail investors to access private equity funds, which previously required a minimum investment of several hundred million won and were subject to account restrictions. One major advantage is the ability to diversify into top-performing hedge fund strategies even with small amounts. At the time of introduction, a minimum investment of 5 million won was set for investor protection, but related regulations were later abolished, making smaller investments possible.

With continued investor interest, some funds have for the first time surpassed 1 trillion won in assets under management. Timefolio Asset Management’s public feeder fund, “Timefolio WithTime Stock Investment Trust (Private Equity Feeder Type),” surpassed 1 trillion won in assets under management in June. Despite rapid index swings, the fund has attracted investor funds by generating returns using a variety of absolute return-oriented strategies, such as long-short and mezzanine.

The Timefolio WithTime Fund invests across more than 20 of Timefolio Asset Management's flagship private equity funds in the "The Time Series." By buying undervalued stocks (long) and selling overvalued stocks (short) to manage volatility, the fund has proven its strong defensiveness—since its launch in September 2019, it has never recorded a negative annual return.

In response to evolving market trends, product structures are also becoming increasingly diversified. Last month, Mirae Asset Global Investments launched the “Mirae Asset Alpha Selection Multi-Asset Investment Trust (Private Equity Feeder Type),” expanding its lineup of public feeder funds. Since 2017, Mirae Asset Global Investments has operated Korea’s first public feeder fund for private equity through the “Mirae Asset Hedge Fund Selection Multi-Asset (Private Equity Feeder Type)”, which has posted a cumulative return of 99.75% since its inception in September 2017. While the original Hedge Fund Selection focused on stable, diversified investments across event-driven, bond, mezzanine, and multi-strategy private equity funds, the newly launched Alpha Selection fund increases its allocation to a long-only strategy centered on listed equities, actively seeking additional market outperformance. In doing so, the firm aims to capture a broader range of investor demand for strategies targeting excess returns relative to the market.

Recently, new products have emerged that pair policy-driven themes and risk-mitigation features. Last month, Korea Investment Management launched the “Korea Investment Level Up Korea Fund (Private Equity Feeder Type),” which invests in core industries and companies benefiting from capital market policies—sectors expected to drive a medium- to long-term re-rating of the domestic equity market. The fund diversifies across seven underlying private equity funds targeting the AI value chain and the defense sector, as well as stocks poised to benefit from value-up policies. Its parent company, Korea Investment Holdings, participates with subordinated capital, adopting a “profit and loss sharing” structure that provides protection for retail investors by covering up to 15% of losses from net asset value.

An official at a major asset management firm said, “As market volatility has become extreme, there’s a growing perception that simply tracking the index with exchange-traded funds (ETFs) is no longer sufficient for strong returns or downside protection. For individual investors, public feeder funds now offer access to quality absolute return strategies, which were difficult to approach before, and for management companies, it’s an opportunity to leverage the expertise of proven fund managers in the public market. The needs of both sides are being met.”

However, it is important for investors to note the dual-fee structure—where management fees are charged at both the master and feeder fund levels—and potential restrictions on redemptions. Due to the nature of feeder funds, investors should check the final fee structure in advance, and, depending on the asset composition of the underlying private equity funds, it may take longer to receive redemption proceeds than with ordinary public funds. This should be factored into overall cash management planning.

This content was produced with the assistance of AI translation services.