South Korea's Ministry of Economy and Finance submitted an 821 trillion won budget proposal for 2027 to the National Assembly on the 3rd, including plans to establish a 162.3 trillion won Future Response Fund with approximately 104.4 trillion won in surplus funds potentially managed through external asset managers via the OCIO model. The fund aims to smooth fiscal volatility caused by semiconductor industry cycles by saving excess tax revenue during boom periods for use during downturns. Minister Park Hong-geun stated the ministry plans to achieve returns exceeding government bond rates by investing surplus funds in stocks and bonds through professional asset management firms, rather than relying on short-term instruments like deposits or money market funds.
Ministry Plans 162.3 Trillion Won Future Response Fund with 104.4 Trillion Won Surplus
The 162.3 trillion won Future Response Fund will allocate 45.4 trillion won to project expenditures and 12.5 trillion won to reduce new government bond issuance, leaving 104.4 trillion won as surplus funds. The ministry will conduct a revised tax revenue estimate at the end of this month, with additional surplus tax revenue from this year to be added to the fund. The actual surplus amount could increase by tens of trillions of won depending on this year's additional tax collection figures.
The fund uses additional tax revenue from semiconductor industry boom periods as its financial source. The ministry previously operated fiscal policy on a "spend more when earning more, spend less when earning less" basis, which caused significant fluctuations in national finances tied to semiconductor export industry performance. The Future Response Fund serves as a fiscal stabilization mechanism to accumulate surplus during boom periods for withdrawal during downturns when tax revenue decreases.
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OCIO Model Considered for Professional Asset Management
The Ministry of Economy and Finance is expected to utilize the OCIO (Outsourced Chief Investment Officer) model, delegating fund management authority to securities firms and asset management companies. OCIO allows pension funds, government agencies, and corporations lacking internal investment capacity to outsource portfolio management to external investment professionals.
A ministry official stated: "We need to find an operational method that can generate returns higher than government bond rates. We are considering selecting separate external asset management firms by referencing similar pension fund cases like the National Pension Service and Private School Teachers Pension." The official added: "Direct internal management through a separate organization is difficult, so outsourcing to external institutions is likely, but specific operational methods and institution selection plans have not yet been determined."
The securities industry anticipates the ministry will select multiple lead managers if the fund establishment is confirmed, as managing even tens of trillions of won creates substantial operational burden for a single firm.
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Samsung Asset Management and Mirae Asset Among Potential Candidates
Candidate firms primarily include asset managers and securities firms currently managing public funds. Among asset management companies, Samsung Asset Management manages the Pension Fund Investment Pool and Industrial Accident Compensation Insurance Fund, Mirae Asset Asset Management handles the Pension Fund Investment Pool and Housing and Urban Fund, and Shinhan Asset Management oversees the Radioactive Waste Management Fund. Securities firms including Mirae Asset Securities and KB Securities may also participate in the bidding process.
The industry attributes heightened sensitivity to the Future Response Fund—which has not yet passed the National Assembly—to recent contract droughts. The existing large public fund market centered on the Housing and Urban Fund and industrial accident/employment insurance funds has solidified around a small number of large firms, with few new large contracts emerging. Even partial outsourcing of Future Response Fund surplus could shift the competitive landscape among service providers.
The ministry will review specific asset management plans after passage of the Future Response Fund Act. Final decisions on actual outsourcing scale, number of lead managers, selection timing, and participating sectors remain pending.
FAQ
What is South Korea's Future Response Fund and how much surplus will it manage?
South Korea's Future Response Fund is a 162.3 trillion won fiscal stabilization mechanism included in the 2027 budget proposal submitted to the National Assembly on the 3rd. After allocating 45.4 trillion won to project expenditures and 12.5 trillion won to reduce government bond issuance, approximately 104.4 trillion won remains as surplus funds. The actual surplus amount could increase by tens of trillions of won depending on additional tax revenue collected this year, which will be added to the fund after the ministry conducts a revised tax estimate at the end of this month.
Why is the Ministry of Economy and Finance considering the OCIO model for fund management?
The ministry is considering the OCIO (Outsourced Chief Investment Officer) model because it lacks internal specialized investment organizations to directly manage over 100 trillion won in surplus funds. Minister Park Hong-geun stated the ministry plans to achieve returns exceeding government bond rates by investing in stocks and bonds through professional asset management firms. A ministry official confirmed that direct internal management through a separate organization is difficult, making outsourcing to external institutions likely, though specific operational methods and selection plans have not yet been determined.
Which firms are potential candidates to manage the Future Response Fund?
Potential candidates primarily include asset managers and securities firms currently managing public funds. Samsung Asset Management manages the Pension Fund Investment Pool and Industrial Accident Compensation Insurance Fund, Mirae Asset Asset Management handles the Pension Fund Investment Pool and Housing and Urban Fund, and Shinhan Asset Management oversees the Radioactive Waste Management Fund. Securities firms including Mirae Asset Securities and KB Securities may also participate. The securities industry anticipates the ministry will select multiple lead managers due to the substantial operational burden of managing tens of trillions of won.
