Can South Korea Nurture a Home-Grown Hedge Fund Industry?

Korea-style hedge funds and prime brokers were a popular topic within Korean financial circles long before their launch in December 2011. In mid-June, the subject become the talk of the town as two conferences that focused on Korean hedge funds took place in Seoul: the Korean Hedge Fund Conference, hosted by Korea’s Financial Services Commission (FSC), the Financial Supervisory Service (FSS), the Korea Capital Market Institute (KCMI), and the New York Hedge Fund Roundtable (NYHFR); and the Korea Investment Conference, hosted by CFA Korea and CFA Institute. The Korea Financial Investment Association (KOFIA), an industry group, was also involved in both events.

The regulatory regime governing hedge funds in Korea has changed dramatically. Building on the liberalization and consumer protection initiatives relating to the Capital Markets Consolidation Act (2009), a number of key changes were approved in 2011 to pave the way for the introduction of Korea-style hedge funds in order to meet the growing demand for alternative investment vehicles that provide more effective portfolio diversification for Korean investors. Korean officials are also aiming to further enhance the breadth and depth of domestic capital markets — and nurture a few world-class investment banks and asset managers. Read more.