SEOUL, July 29 (Yonhap) -- South Korea said Sunday it will ease regulations on hedge funds to enable asset managers and brokerage houses to more easily set them up, with an aim to nurture the related sector.
A hedge fund is privately pooled money used by investors who seek massive investment returns through risky bets using a wide range of investment techniques, including short selling and leveraged buyouts.
Asset managers whose money under management is more than 1 trillion won (US$877.2 million) will be able to establish hedge funds, the Financial Services Commission (FSC) said in a statement. Currently, only asset managers with more than 10 trillion won under management are qualified to set up hedge funds.
Brokerage houses with around 500 billion won in equity capital will be also able to set up hedge funds, easing the current minimum of 1 trillion won. The move will take effect starting November.
The change comes as Seoul steps up efforts to foster the finance industry by introducing hedge funds and investment banks in the hope those will inject liquidity into the local market via robust arbitrage trading.
A law revision enabled asset managers to set up hedge funds starting late last year. Previously, South Koreans were only allowed to invest in hedge funds overseas.
A total of 12 hedge funds worth of a combined 150 billion won opened in December, growing to 19 funds worth 717.9 billion won as of July 25, according to the FSC.
South Korea's hedge fund market size is projected to reach as much as 24 trillion won by 2016, according to the Korea Capital Market Institute.