How are the maturity and investor eligibility of private funds investing in mezzanine securities determined?

When the Financial Services Commission and the Financial Supervisory Service announced the direction of private fund reforms in 2020, they explained that funds with a high proportion of illiquid assets that are hard to sell immediately, such as privately placed bonds and mezzanine securities, are generally set up as closed-end funds with maturities of usually 2 to 3 years.

This is because a maturity mismatch, which makes it hard to meet redemption requests, can arise if the fund's maturity is shorter than when its assets can be recovered or if it allows redemption at any time. In addition, general private funds may be sold only to qualified investors as defined by law, so check the fund's maturity, redemption terms and investor eligibility requirements before subscribing.