As the amount of real estate fund raising have increased for 24 months in a row, its total assets are expected to surpass 60 trillion won (US$52.89 billion) by the end of this year. In contrast, withdrawals of capital from conventional funds, including equity fund, have continued despite the stock market showing an upward trend through the first half of the year. With the current trend, real estate funds will exceed equity funds soon, according to industry sources.
According to the Korea Financial Investment Association on September 25, the net assets of real estate funds increased from 50.9 trillion won (US$44.86 billion) at the end of March to 56.1 trillion won (US$49.45 billion) as of the end of last month. The figure grew 5.2 trillion won (US$4.58 billion) in five months, showing an average increase of more than 1 trillion won (US$881.45 million) a month. Considering the fact that it took 17 months to surpass from 30 trillion won (US$26.44 billion) to 40 trillion won (US$35.26 billion) and 9 months from 40 trillion won (US$35.26 billion) to 50 trillion won (US$44.07 billion), showing a reduction of the period, the net assets of real state funds are highly likely to exceed 60 trillion won (US$52.89 billion) by the end of the year.
The capital herding to real estate funds is nothing new. The amount of real estate funds have increased for 24 consecutive months after it only decreased once from 33.04 trillion won (US$29.12 billion) at the end of July 2015 to 32.96 trillion won (US$29.05 billion) at the end of August. However, equity funds show a start contrast. The total amount of equity funds dropped from 79.81 trillion won (US$70.35 billion) to 70 trillion won (US$61.71 billion) over the same period. Under the trend, the gap between equity funds and real estate funds also declined from 74 trillion won (US$65.23 billion) at the end of 2012 to 15 trillion won (US$13.22 billion) at the end of last month. Although the fund market is shrinking, only real estate funds show a significant growth.
Real estate funds are growing based on large institutional investors and private equity funds account for over 95 percent of the total net assets. As public offering funds have continuously released from the beginning of the year, the share is rising from 2.2 percent from the end of June last year to 2.7 percent at the end of December and 3.4 percent at the end of August this year, but it has still remained at low levels. Most products are big private equity funds so investors participating in real estate funds are mostly large institutional investors. There are only 3.1 percent of individual investors. This is because there are few real estate funds that can be invested by small individual investors and public offering funds are highly competitive. Currently, individual investors account for 2.1 percent of private equity real estate funds and 69 percent of public offering real estate funds.