Can a KOSDAQ venture fund hold convertible bonds (CBs) or bonds with warrants (BWs) issued by venture companies?

Yes. 'Investment' under the Act on the Promotion of Venture Investment includes subscribing for unsecured convertible bonds and unsecured bonds with warrants, so such mezzanine securities can count toward the requirements.

Public funds generally may not hold unsecured bonds that have not been rated, but following improvement measures in 2018, the Regulations on Financial Investment Business make an exception for venture company investment trusts holding certain unsecured bonds specified in the regulations, such as unrated bonds for the qualified institutional buyer (QIB) market. Mezzanine securities also carry the issuer's credit risk, so the issuer's ability to repay should be examined.