South Korea Alternative Investment Outlook: Q2 2019 (Real Estate)

Sharing Insights and Trends from South Korea’s Financial Services Industry 

As we continue to expand our clientele throughout South Korea, the DM Korea Team will share a quarterly market outlook report, highlighting insights directly from South Korea’s alternative investment sector.

As mentioned in the piece, Increasing Korean Investment in Overseas Real Estate, Korean investors are attracting public attention throughout the global real estate industry. Furthermore, the market anticipates these investors will continue to invest within the real estate asset class and increase allocations.

 

DarcMatter Korea - Real Estate

Figure 1.1 The total AUM of NPS of Korea and the weight of overseas alternative assets & real estate

For instance, according to its website, National Pension Service (NPS), the largest pension domestically and third largest globally, has investment mandates to deploy 40.9% of in-house management portion of the global alternatives. NPS currently has 8.1% of their total asset base invested in overseas alternative investments, totaling US$ 48 Bn, as shown in Figure 1.1. According to NPS, it is diversifying its investment portfolio from overseas landmark office buildings to infrastructure such as airports. 

Hana Financial Investment (Hana), one of the biggest financial institutions in Korea, has continued to make rapid strides in the past two years by investing in the overseas real estate industry. Hana has been investing US$ 4.6 Bn into 30 different properties since 2014. Of these investments, 17 total over US$ 3.1 Bn and were completed in 2018 and throughout 2019. Hana is expanding its business focus from North America to Europe and the Middle East, investing in not only office buildings but also in shopping centers and distribution centers.

 

DarcMatter Korea - Real Estate

Figure 1.2 The weight of alternative assets in the KIC portfolio

Korea Investment Corporation (KIC) is one of the financial institutions that has officially announced its plan to source overseas real estate. The CEO of KIC announced in early 2019 that KIC will expand their allocations to alternative investments in stages within the next two years. As seen in Figure 1.2, it is planning to have alternatives account for 20% of its total asset under management by 2020-2021. In 2019, KIC’s investing amount in alternative investments is accounts for 16% of KIC’s US$ 138.3 Bn total portfolio (February 2019). Specifically, KIC’s plan is to increase investment in global real estate such as overseas core office buildings, directly out of its alternative investment portfolio.

US$ 1 = KRW 1155.52 (06/30/2019)