Sharp Increase
The National Pension Service (NPS) has invested in a remarkably large amount of real estate in the Americas and Europe over the past three years, increasing its portfolio by over 60 percent during that time. During the same period, it increased its total amount of overseas real estate investments by 23 percent as well. This shift is the outcome of a deliberate reduction in the proportion of investments in Asia, which accounted for more than 40 percent, and a corresponding increase in investments in other regions.
According to fund disclosure by the NPS on Aug. 8, the aggregate value of its overseas real estate investments stood at 33.1205 trillion won (US$25.09 billion) as of the end of last year. This represents a whopping increase of 22.7 percent compared to the 26.9954 trillion won recorded at the end of 2019.
Analyzing the investment allocation by geographical region, it becomes evident that investments in the Americas were the most significant portion at 38.8 percent (12.8543 trillion won). Subsequently, investments in Europe stood next highest with a share of 24.8 percent (8.2228 trillion won), while the combined total for Asia, including Australia, amounted to only 20.5 percent (6.7894 trillion won). Notably, other global investments accounted for 15.9 percent (5.2539 trillion won) of the overall portfolio.
Examining the overseas real estate investment portfolio of the recent three-year period reveals a strategic approach of steadily diminishing the proportion of investments in Asia, which once surpassed 40 percent. Meanwhile, a balanced approach has been maintained towards investments in the Americas. Additionally, efforts have been directed towards augmenting the allocation in Europe and the global market.
While overseas investments have increased over the span of three years, the investment balance in Asia has experienced a substantial decline from 11.1248 trillion won to 6.7894 trillion won, marking a reduction of approximately 39 percent. In terms of regional investment distribution, the share allocated to Asia has decreased from 41.2 percent to 20.5 percent.
The investment balance in the Americas has demonstrated a consistent upward trend, expanding from 8.7104 trillion won to 12.8543 trillion won. The proportion surged from 32.3 percent to reach a peak of 41.7 percent in 2021, yet by the conclusion of last year it receded back to 38.8 percent.
NPS investments in Europe have undergone a whopping 87 percent surge over the past three years, elevating from 4.3953 trillion won. This growth has been mirrored in the proportion, which has steadily risen from 16.3 percent to 24.8 percent. Simultaneously, investments in other global areas have shown a substantial upswing of 90.0 percent, ascending from 2.765 trillion won. This increase is also reflected in the proportion, which has expanded from 10.2 percent to 15.9 percent.
As a cumulative outcome, the investment balance in the United States and Europe has expanded by 61 percent, surging from 13.1057 trillion won to 21.771 trillion won over the past three years. Amid the process of evenly distributing the investment portfolio across regions, the diminished proportion allocated to Asia has been redirected to other regions.
The predicament lies in the escalating sense of crisis surrounding the commercial real estate markets in both the U.S. and Europe on a global scale. Notably, the NPS is also proactively engaging in an assessment of its investment assets. In April of the past year, NPS Director Kim Tae-hyun reportedly undertook a comprehensive inspection of the commercial real estate investments made in New York during his inaugural overseas trip.