Return on Investment Plummeting
The Korea Financial Investment Association announced on May 13 that South Korean investors’ overseas real estate funds totaled 57,915.3 billion won on May 11 and the value increased more than 20-fold in 10 years.
South Korean institutional investors have continued to increase their overseas real estate investment for income diversification amid very low interest rates. For instance, the National Pension Service’s overseas real estate investment has jumped from 4.1 trillion won to 23.7 trillion won during the same period. Banks, insurers and securities companies have attracted an increasing number of customers with more and more products for overseas real estate investment.
However, the returns of the funds are plummeting in the wake of the COVID-19 pandemic. At present, most overseas real estate funds available in South Korea are showing double-digit negative returns. According to financial data provider FnGuide, 70 funds that have a size of at least one billion won each and have been in the market for at least one year are showing an average return of negative 12.11 percent this year. The current loss of the Consus Asset Management’s Consus Sakhalin Real Estate Investment Trust Fund amounts to 46.35 percent.
The returns of the funds are unlikely to rebound in the near future. This is because COVID-19 will have lasting impacts on the real economy and international financial markets.