Korea’s real estate fund market exceeded 60 trillion won ($56.3 billion) for the first time as investors turned to alternative assets for returns amid prolonged low interest environment.
According to Korea Financial Investment Association (KOFIA) on Monday, net assets in real estate funds in Korea amounted to 64.7 trillion won at the end of last year, surging 25.1 percent from a year-ago period. The number of real estate fund products in the local market reached 1,175 as more than 300 new funds were established in 2017 alone.
The growth of real estate funds has been rapid to the extent of threatening the position of traditional funds with underlying equities whose net assets came to 68 trillion won at the end of 2017. Capital has continued to flow in to real estate funds while investors have kept on a selling spree for equity funds as the stock market has not showed any substantial growth since 2013.
Funds investing in overseas properties have been particularly popular with more than 130 new products created last year alone.
Despite the surging demand, there are only limited types of real estate funds available in the country due to diverse restrictions in the market. “The demand for real estate funds is on the rise amid the low interest rate and low growth environment, but we cannot provide various products due to domestic regulations,” Kim Sung-deuk from Hana Alternative Asset Management.
By Han Ye-kyung and Choi Mira
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Source: Pulse by Maeil Business News Korea (Jan. 9, 2018)