Due to the severe downturn in the global commercial real estate market, overseas real estate mutual funds are rapidly emerging as a new potential catalyst in the financial market. With recent one-year returns plummeting to as low as -80 percent, there are signs indicating the looming realization of significant losses for individuals who have invested a total of 874.7 billion won (US$656.68 million), including 4.104 trillion won this year, in overseas real estate mutual funds that mature by 2026.
According to fund evaluator FnGuide on Feb. 12, the recent one-year return rates of major overseas real estate mutual funds have plunged to the range of -30 percent to -82 percent, prompting alarm in the financial and investment industries. For example, the “IGIS Global Real Estate Investment Trust No. 229,” which invested in the Trianon Building in Frankfurt, Germany, saw its return rate plummet to -82.17 percent, leading to an extension of the fund’s maturity from November last year to the end of this month.
Similar situations are observed with other funds as well. For instance, the “Mirae Asset Maps U.S. Real Estate Investment Trust 9-2,” which invested in offices in Dallas, Texas, saw approximately 300 billion won raised within ten days of fund recruitment in 2016. However, the fund incurred losses of around 20 percent last year and had to sell the building due to the real estate downturn.
The total size of funds reaching maturity this year amounts to 436.5 billion won, with individual investments totaling 410.4 billion won, based on data released by the office of Representative Yun Chang-hyun of the ruling People Power Party. Following this, funds worth 347 billion won are due for maturity next year with 272.5 billion won from individual investments, and 253.2 billion won is scheduled to mature after 2026 with 191.8 billion won from individual investments. Unless alternatives such as maturity extensions or additional investments through beneficiaries’ meetings are available, losses are inevitable.