South Korea’s financial regulator recently allowed a subsidiary of real estate services provider Savills Korea to enter the asset management market and operate real estate private equity funds, a government official said on Jan.9.
Savills Investment Korea, a wholly owned subsidiary of Savills Korea, was established in 2014 to provide investment advice to individual investors.
“The tentatively named Savills Investment Korea was registered as of Jan. 2 at the Financial Supervisory Service to run private funds. The company name might be changed to include ‘asset management,’ but the decision about the name is up to the company,” an official at the FSS, who declined to be named, told The Korea Herald.
“After operating private equity funds for at least three years and if assets under the company’s management exceeds 300 billion won ($248 million), it will be eligible to apply for an FSS approval to run public funds,” he said.
SIK’s registration at the FSS for the operation of real estate private equity funds is interpreted as preparation to run a publicly placed real estate fund in the future, possibly after three years, to tap the growing real estate fund market.
Jeon Kyoung-don, president and CEO of Savills Korea, said in an interview with The Korea Herald last month that the company was paying attention to the growing needs of individual investors in the real estate sector’s capital market.
“We’re seeking to provide an environment for individual investors,” Jeon said during the interview without elaborating further.
Savills Korea spokesperson Kim Jung-eun had no comment on the issue.
Private funds usually target institutional investors, such as pension funds, while public funds target individual investors.
Korea’s real estate fund market has rapidly grown over the past decade, with the total volume of assets under management rising more than 10 times to reach 47.16 trillion won as of the end of 2016 from 4.17 trillion won at the end of 2006, according to data from the Korea Financial Investment Association.
Of the total 47.16 trillion won real estate fund market last year, 45.8 trillion won was run by private equity funds and the remaining 1.3 trillion won was controlled by publicly placed funds.
Institutional investors are increasingly eyeing the real estate sector as an alternative investment to boost profits, while low interest rates and the bearish local stock market do not bode well in their search for high yields.
The National Pension Service last month decided to invest 380 billion won in a real estate private equity fund operated by Igis Asset Management. The investment was made jointly with Shinsegae Group for the group’s shopping mall Starfield Goyang, to be built in Gyeonggi Province, Korean news report said.
The fund’s expected rate of return is approximately 9 percent, they said.
By Kim Yoon-mi/The Korea Herald (firstname.lastname@example.org