Korea Investment & Securities Sets Up KRW 161.4 Billion Profit-and-Loss-Differentiated Fund 'Korea-U.S. Earnings Focus'

'Loss-buffering feature' draws attention amid volatile markets

Korea Investment & Securities said on Oct. 15 that it had established the profit-and-loss-differentiated public offering fund "Korea Investment Korea-U.S. Earnings Focus" with approximately KRW 161.4 billion in assets. With volatility in domestic and overseas stock markets intensifying recently, investors' funds appear to have flowed into financial products that offer relatively stable returns by cushioning losses.

"Korea Investment Korea-U.S. Earnings Focus" is a public offering fund that invests in a fund of private equity funds and distributes gains and losses according to seniority, dividing beneficiaries into senior and junior tranches. Retail customers participate as senior investors, while Korea Investment & Securities and other group affiliates participate as junior investors. Even if losses occur during the fund's operation, the company, as the junior investor, absorbs losses first up to 15% of the underlying funds' value. Conversely, when the fund generates gains, returns of up to 10% are allocated between senior customers and the company (the junior investor) at a ratio of 85 to 15, while returns above 10% are divided at a ratio of 55 to 45.

The product is managed by Korea Investment Management. It invests in a diversified portfolio of leading companies in Korea and the United States, carefully selecting industries that are resilient in volatile markets and high-interest-rate environments. In particular, to avoid concentrating investments in any one sector, it allocates approximately 14% of its assets equally to seven underlying private equity funds covering software, platforms, semiconductor materials, parts and equipment, artificial intelligence (AI) semiconductors, shipbuilding, power, and financial services.

The fund has a maximum term of three years and will be redeemed early if the customer's return reaches 15% during the management period. If the early redemption target is met within one year of the fund's establishment, the fund will be safely invested in liquid assets such as money market funds (MMFs) until the one-year mark to protect investors and secure liquidity, before proceeding with redemption.

Since 2023, Korea Investment & Securities has worked with group affiliates to continuously offer the market public offering funds with differentiated profit-and-loss allocations, backed by a range of underlying assets, including leading domestic stock market sectors, future growth industries, global big tech companies, and AI innovation. The funds' performance is also becoming evident. Of the 19 such public offering funds, including the newly established fund, 16 have already achieved their target returns and completed early redemption or are close to doing so.

Korea Investment & Securities President Kim Seonghwan said, "As market volatility increases, a financial company's core value lies in proactively reducing customers' investment risks and creating stable yet reasonable opportunities for returns. By combining an advanced risk management framework with Korea Investment & Securities' distinctive global sourcing capabilities, we will expand our provision of differentiated, consumer-protection-focused financial solutions that safeguard customer assets while also delivering returns superior to the market."

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