The South Korean government has officially begun establishing an $880 million 'long-term technology investment fund' aimed at investing in advanced industries that require extensive research and development over a period of up to 16 years. The fund will target sectors such as next-generation semiconductors, advanced biotechnology, and defense. This initiative seeks to address the limitations of existing policy financing, which has been overly focused on short-term results and returns, by providing 'patient capital' to support technology development from research to commercialization.
On August 20, the Financial Services Commission announced the opening of applications for fund management companies, initiating the selection process. The long-term technology investment fund is part of the National Growth Fund's indirect investment program, with plans to raise a total of $880 million this year.
A significant portion of the funding will come from policy funds, including $600 million from the Advanced Strategic Industry Fund and $80 million from the national budget, totaling $680 million to alleviate the fundraising burden on private management companies. Considering the characteristics of technology firms that require long-term investments, the investment period is set to a maximum of seven years, with the fund's lifespan established at 13 to 15 years, allowing for a one-year extension.
Domestic technology companies often take more than ten years from startup to initial public offering (IPO) or commercialization, but existing financial markets have prioritized short-term performance and returns. The long-term technology investment fund aims to ensure continuous funding from the initial research and development (R&D) phase through scaling up to commercialization.
Seven fund managers will be selected, divided into small and medium categories, with three chosen from the small category and four from the medium category. To encourage investment in companies with proven technology, those with a Technology Credit Rating (TCB) of TI5 or higher will be recognized as primary investment targets.
The government is also taking steps to prevent investment concentration. It mandates that at least 40% of the primary investment amount be allocated to sectors outside of artificial intelligence (AI) and semiconductors. This aims to broaden the investment base into areas like biotechnology and defense, which require long-term R&D.
The government plans to begin disbursing funds as early as the end of the year, with final selections for fund managers expected in October. Additionally, the investment targets of the National Growth Fund will be gradually expanded, with plans to amend the Korea Development Bank Act to include advanced industries such as aerospace in the second half of the year.
Industry experts anticipate that if the long-term technology investment fund operates as planned, it could provide much-needed financial relief to companies facing lengthy technology development periods and significant commercialization uncertainties. However, due to the nature of long-term investments, it may take considerable time for investment results to materialize, making the selection and post-management capabilities of fund managers critical to the fund's success.
* This article has been translated by AI.
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