South Korea's brokerage industry will invest about 1 trillion won in secondary deals over the next 3 years to improve a venture investment exit structure heavily skewed toward initial public offerings (IPOs).

The Korea Financial Investment Association said on Aug. 31 that securities firms plan to supply funds to the venture exit market through individual investments and the creation of a joint fund.

Secondary investment is a way for other investors to buy shares in unlisted companies or fund stakes held by existing venture investors. It is used as a channel for existing investors to recover their investment even before a venture company lists.

First, 7 mega investment banks (IBs) that run note issuance and comprehensive investment account (IMA) businesses will invest about 618.5 billion won individually. They are Mirae Asset Securities, Shinhan Investment Corp, NH Investment & Securities, KB Securities, Kiwoom Securities, Hana Securities and Korea Investment & Securities.

If more note-issuing firms are added, individual investment is expected to increase to about 700.0 billion won.

Separately, the 15 securities firms with the highest operating profit last year and the association will create a joint fund worth 300.0 billion won. They plan to invest in the secondary market after selecting a manager and signing capital commitments.

The association has pushed to expand the secondary market, seeing domestic venture investment exit methods as excessively concentrated on IPOs and subject to big swings in exit conditions depending on market circumstances.

Hwang Seong-yeop (황성엽), chairman of the Korea Financial Investment Association, said at a capital market meeting chaired by President Lee Jae-myung (이재명) in March that the financial investment industry would supply more than 20 trillion won in venture capital over the next 3 years and actively support the venture exit market.

Including separate support measures of up to 1 trillion won being pursued by related securities institutions, funds supplied to the venture exit market through the financial investment industry are expected to expand to about 2 trillion won.

Hwang said, "This plan is meaningful in that the brokerage industry is participating in building a growth ecosystem for venture and innovative companies." He said, "We will continue efforts to vitalise the venture exit market and expand the supply of venture capital."