The introduction of the 'direct listing of public funds' system, which is being promoted to revitalize the public fund market, is increasingly likely to be postponed. This is due to repeated computer errors in the securities industry and the longer-than-expected development of the computer system for listing transactions.
With the deadline for applications to participate in the direct listing of public funds still not concluded, the asset management industry has gained time to consider participation. However, asset management firms are unable to decide on their entry due to being cautious of the banks, the largest fund distributors.
According to the financial investment industry on the 24th, the direct listing system for public funds, originally scheduled for introduction this June, is expected to be postponed to the second half of the year due to delays in the development of the computer system.
The direct listing of public funds is a system being promoted under the leadership of the Korea Financial Investment Association to foster a fund market that has been stagnant due to competition from exchange-traded funds (ETFs). The financial authorities plan to apply the existing 'fund transfer system' to the direct listing system for public funds to encourage listings. The fund transfer system allows previously enrolled funds to be managed by different distributors.
If transfers of funds are made possible, it is inevitable that a capital outflow from the banking sector, which has primarily handled fund sales, will occur. Since the direct listing of public funds will be introduced gradually, there may not be a large-scale movement of funds immediately, but asset management firms have no choice but to be cautious of the banks.
A representative from a small to medium-sized asset management firm noted, "I was informed that once the direct listing system is implemented, it will allow for the transfer of funds enrolled at banks to securities firms," and added, "In that case, capital is likely to flee from banks, and there is little reason for the asset management industry to participate at the risk of provoking the major distributors, the banks."
The direct listing of public funds is a system for listing public funds that have primarily been sold at bank and securities firm counters on the stock market. It involves adding an X (listed) class to the fund classification system and allowing listings only if the total fund size reaches 50 billion won and the X class raises more than 7 billion won.
The asset management industry believes it is difficult for public funds, overshadowed by ETFs, to secure competitiveness solely with the direct listing of public funds. There are a total of 795 funds amongst the 24 asset management firms designated for innovative financial services with more than 50 billion won, which accounts for 17.5% of the total 4,533 funds, indicating a significant reduction in product options. Additionally, it is predicted that compared to ETFs, aspects like investment convenience and fees will highlight the disadvantages of funds in the stock market.
One representative stated, "From an investor's perspective, there isn't much incentive to invest in public funds in the stock market when ETFs are available," and added, "Even if the system is implemented, it seems unlikely that the market will grow, and I wonder if it is necessary to create friction with the banks, which handle most fund sales."
Some have expressed the opinion that even if transfers of public funds occur, there is no need to be overly cautious of the banks. As the success of the direct listing system itself is not guaranteed, even if transfers become possible, it is expected that the scale of capital flight from banks will not be large.
Another representative from an asset management firm mentioned, "Even if fund transfers are possible, it can only be done through securities firms participating as liquidity providers (LP)," and added, "I understand that the scale of transfers from existing investors is not expected to be large, so the banks are not overly concerned."
A representative from the Korea Financial Investment Association explained, "In the initial stages of the direct listing system, only a small number of funds, less than 1% of all funds, will undergo listing," and added that concerns about capital movements across sectors are likely to be minimal.