The government is reportedly conducting a full-scale review of measures to allow venture capital (VC) investments for retirement pensions. The industry has consistently demanded this, and with Lee Jae-myung's government emphasizing the activation of venture capital supply, it seems to be gaining momentum. The government expects that allowing venture investments in retirement pensions will simultaneously achieve the policy goals of improving venture capital supply and the revenue of retirement pensions.
However, some have pointed out that if high-risk investments for retirement pensions, which are the citizens' retirement funds, are decided too easily, there may be side effects. Until now, the government has emphasized conservative investments such as banning direct stock investments due to the stable operation of retirement pensions.
In the VC industry, concerns related to this issue suggest that allowing investment through a fund-based approach linked to the government's promotion of retirement pension fund formation is likely. This is because it minimizes risks in a manner similar to that of the National Pension Service's venture investments, while expecting stable revenue.
According to investment banking (IB) sources on the 28th, the government is positively reviewing a reform proposal for the retirement pension system that includes allowing venture investments.
The Presidential Committee on Policy Planning, which acts as Lee Jae-myung's government transition committee, had previously proposed allowing venture investments for retirement pensions as a key policy to activate venture capital supply.
According to the Ministry of Small and Medium Enterprises and Startups, the scale of domestic venture investments was about 12 trillion won last year. This figure nears 1.5 times the 8 trillion won from the early days of the COVID-19 pandemic but represents a decrease compared to the 16 trillion won during the peak investment year of 2021. President Lee Jae-myung promised to increase domestic venture investment to 40 trillion won during his campaign.
The VC industry has continually demanded that the government allow venture investments for retirement pensions and public pension funds to significantly expand the scale of venture investments. In contrast, the government has shown a passive stance towards venture investments while emphasizing the stable operation of retirement pensions.
However, as President Lee Jae-myung has begun to seriously activate venture capital, the proposal to allow venture investments in retirement pensions is gaining momentum. The recent government's promotion of fund formation and revenue enhancement measures is also cited as one reason for actively reviewing venture investment allowances. The National Pension Service, which serves as a model for pension fund formation, plays a role in providing venture capital supply and maintaining revenue through annual venture fund investment projects.
A representative from the VC industry said, “Recently, the budget for venture investment contribution in the supplementary budget has increased by nearly 600 billion won, showing the current government's active approach to venture capital supply,” adding, “It seems this reform plan for retirement pensions is also being reviewed from the same perspective.”
Regarding concerns that venture investments are too risky, the industry believes the government will choose a contribution-based approach that maximizes stability.
A contribution project involves investing funds into a specialized venture fund management company and sharing profits. Utilizing such contribution projects can reduce the risk of losses compared to individual stock or portfolio investments made directly by retirement fund participants while generating stable revenue.
In fact, it is reported that the National Fund, which operates in a similar manner, has an annual fund revenue reaching around 20%. In contrast, retirement pension revenue has remained at about 2% over the past five years.
An industry representative noted, “Given how the government has emphasized operational stability, it appears most realistic to create contribution projects and entrust them to fund management companies rather than direct investments,” adding, “The National Pension Service also invests in ventures in this manner.”
In this regard, the Ministry of Employment and Labor, the relevant authority, stated that nothing has been determined concerning venture investments for retirement pensions.