For the primary time since its institution in 2001, Korea’s Pension Fund Pool is moving into enterprise capital. With a joint ₩40 billion ($29 million) dedication alongside the Korea Fund of Funds, the transfer indicators a significant coverage shift aimed toward strengthening startup exits and secondary markets. For founders, traders, and policymakers alike, this marks a pivotal second in Korea’s journey towards productive finance.
Pension Fund Pool’s First Enterprise Step in Two Many years
South Korea is opening a brand new chapter in institutional capital participation. On August 27, the Ministry of SMEs and Startups (MSS) introduced that the Pension Fund Pool (by way of the Commerce Insurance coverage Fund) and the Korea Fund of Funds will every commit ₩20 billion, collectively establishing a ₩40 billion (~roughly $29 million) “LP First Step Fund.”
That is the first-ever enterprise funding for the reason that Pension Fund Pool system was launched in 2001 to handle surplus pension belongings in a consolidated method. For 20 years, the pool — together with the Commerce Insurance coverage Fund — had by no means allotted capital to enterprise automobiles.
The LP First Step Fund was newly created in 2025 to draw institutional traders with no prior expertise in enterprise fund commitments. It lowers entry obstacles by providing enhanced incentives, reminiscent of:
- Loss safety: authorities shoulders preliminary losses,
- Revenue transfers: redistribution when returns exceed expectations,
- Fairness buy rights: the flexibility to accumulate shares of portfolio corporations at pre-set costs,
- Free sector alternative: first-time LPs can outline their very own funding domains.
Concentrating on Secondary Markets to Enhance Exits
The ₩40 billion (~$ 29 million) guardian fund was accomplished on August 18, following overview by the Fund Pool Steering Committee and approval by the Commerce Insurance coverage Fund’s Asset Administration Committee.
Via this car, MSS plans to pick managers to function an estimated ₩57 billion (~$41 million) in sub-funds, with investments concentrated within the secondary market — transactions involving the resale of present enterprise stakes. By aligning with the Commerce Insurance coverage Fund’s preferences, the concentrate on secondary offers is anticipated to invigorate Korea’s exit market, a long-standing problem for the ecosystem.
Enterprise Funds as “Productive Finance”
SMEs and Startups Minister Han Seong-sook underscored the strategic significance of the initiative:
“Enterprise funds are a key instrument of productive finance — investing in modern ventures and startups, supporting their progress, and distributing returns again to LPs.”
Minister Han additionally emphasised that the Korea Fund of Funds has demonstrated steady efficiency even in public-interest-heavy sectors, producing over 8% on common yearly, and greater than 10% over the previous 5 years.
Amongst 308 sub-funds value ₩8.9 trillion (~$6.4 billion) which were liquidated, the inner price of return (IRR) has averaged 8.9%.
“With the LP First Step Fund, the Pension Fund Pool has opened its first pathway into productive finance. The Fund of Funds will proceed to strengthen its position as a enterprise funding platform, guaranteeing extra private and non-private capital flows into the enterprise market.”
Unlocking Korea’s Institutional Capital
This milestone addresses one of many enterprise trade’s longest-standing targets: bringing in Korea’s large-scale institutional funds to strengthen enterprise financing capability.
By channeling pension-related surplus capital into structured automobiles, Korea is looking for to:
- Increase the investor base for startups,
- Stimulate secondary transactions to enhance liquidity and exits,
- Assist construct confidence in enterprise capital as a viable institutional asset class,
- Assist extra sustainable progress of the startup ecosystem.
The transfer additionally aligns with Korea’s broader push to reposition productive finance on the heart of financial coverage — leveraging each private and non-private capital to speed up innovation.
Stronger Course and Sustainability for Korea’s Startup Ecosystem
Korea’s first pension fund-backed enterprise funding marks a symbolic and sensible step towards deepening the capital base for startups.
With the Fund of Funds performing as a stabilizing platform and the Pension Fund Pool coming into enterprise capital for the primary time since its inception, the initiative indicators a stronger future for secondary markets, exits, and long-term sustainability of Korea’s startup ecosystem.
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