The Financial Investment Association's ambitious initiative to allow direct listings of public funds has lost significant traction just eight months after its launch. A lack of market interest, regulatory limitations, and the anticipated introduction of fully active exchange-traded funds (ETFs) have raised doubts about the program's future.
As of June 8, sources in the financial investment sector report that the association is not currently engaged in discussions with asset management firms regarding the direct listing of public funds. While several firms explored listing possibilities until the end of last year, inquiries and negotiations have virtually ceased recently.
The core of this initiative was to enable investors to buy and sell public funds on exchanges like regular stocks. It aimed to provide a new investment vehicle for those preferring more active management strategies and to revitalize the sluggish public fund market. The regulatory authorities approved the program as an innovative financial service (sandbox), allowing direct listings to commence on October 27, 2025.
However, the market response has fallen far short of expectations since its implementation. Many asset managers opted out due to high listing standards, and investor interest has been limited. Following the listing of the 'Eugene Champion Short-Term Credit X Class,' the average daily trading volume has remained around 39.5 million won. Although some trading occurred initially, there have been no transactions on five of the last ten trading days.
The situation is similar for the 'Daishin KOSPI 200 Index X Class,' which has seen an average daily trading volume of about 22 million won since its listing. Analysts attribute the program's failure to meet expectations to insufficient liquidity stemming from a lack of investor interest.
Additionally, the government's push to introduce fully active ETFs in the first half of this year poses another challenge. Fully active ETFs allow asset managers to construct portfolios entirely at their discretion, independent of benchmark indices. This could absorb much of the active investment demand that the public fund direct listing sought to capture, leading industry experts to view fully active ETFs as a potential substitute.
A representative from the Financial Investment Association stated, "There are currently no discussions regarding the direct listing of public funds, likely due to issues such as the fully active ETFs."
If the current situation persists, there are concerns that the public fund direct listing may not extend beyond its sandbox trial period. As an innovative financial service, if it fails to demonstrate sufficient results after a two-year validation period, extending or formalizing the program may prove difficult.
The public fund direct listing was a key initiative pushed by former Financial Investment Association Chairman Seo Yoo-seok during his tenure. Some analysts suggest that the lack of market success, coupled with the new leadership's priorities, may have diminished the focus on initiatives launched under the previous administration.
* This article has been translated by AI.
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