Korea to introduce high-yield bond funds

New legislation may lead to market chaos, warn fund managers.
South Koreas National Assembly is hurrying through a bill to allow investment trust management companies offer high-yield fixed-income funds to investors. The legislation was initially slated to pass by July 1, but last-minute wrangling with the tax authorities means it will not be passed for another two or three weeks.

The government is keen to offer a broader product range to retail and institutional investors and deepen the domestic capital markets. Fund managers are wary of the details buried in the legislation, however, and fear it is merely a way to help fund companies saddled with unwanted paper fob it off to investors.

The law requires high-yield bond funds contain a minimum...

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