A way through volatile markets

Retail customers take senior tranche; group affiliates take junior

'Consumer-protective financial solution'

[Provided by Korea Investment & Securities]
[Provided by Korea Investment & Securities]

Korea Investment & Securities said Thursday it has established a profit-tiered public offering fund called Korea Investment Han-Mi Earning Focus at about 161.4 billion won ($121 million).

The launch comes as volatility has intensified in domestic and overseas equity markets, drawing investor capital toward financial products designed to cushion losses while still pursuing relatively stable returns.

Korea Investment Han-Mi Earning Focus is a publicly offered fund-of-private-equity-funds that divides beneficiaries into senior and junior tranches for allocating gains and losses.

Retail customers participate as senior investors, while Korea Investment & Securities and its group affiliates take the junior tranche.

Under the structure, if losses occur during the fund's operation, the company — as the junior investor — absorbs losses first, up to minus 15 percent at the sub-fund level. On the upside, returns up to 10 percent are shared between senior customers and the junior company at an 85-to-15 ratio, while any gains beyond 10 percent are split 55 to 45.

The fund is managed through Korea Investment Management and invests in a diversified selection of leading Korean and American companies with strong earnings quality, focusing on sectors resilient to market volatility and high interest rates.

To prevent concentration in any single sector, assets are allocated roughly 14 percent each across seven sub-private equity funds covering software, platforms, semiconductor materials and components, AI semiconductors, shipbuilding, power and financial services. The fund has a maximum maturity of three years, with early redemption triggered if the customer return rate reaches 15 percent during the investment period.

If the early redemption target is met within one year of establishment, the fund will be held in liquid assets such as money market funds until the one-year mark — to protect investors and ensure liquidity — before the redemption process begins.

Korea Investment & Securities President Kim Sung-hwan said that as market volatility grows, the core value of a financial firm lies in proactively reducing customers' investment risk while creating stable and reasonable return opportunities. "We will continue to combine our advanced risk management framework with Korea Investment & Securities' global sourcing capabilities to expand our differentiated, consumer-protective financial solutions," he said.

Korea Investment & Securities is also selling special-edition promissory notes through the end of this month. The offering targets Bankis customers making their first transaction with the firm this year, as well as customers depositing new funds. Eligible customers can subscribe at a contracted annual yield of 5.0 percent for a one-year maturity or 4.7 percent for a six-month maturity.


jiyun@heraldcorp.com