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South Korea-based Investors in Private Real Estate Funds – February 2014

by Joyce Chee

  • 12 Feb 2014
  • RE

South Korea-based investors have a significant presence not only in the Asia-Pacific region, but also on a global scale. In terms of GDP, South Korea has seen the fastest annual growth rate in the country’s history in the last three years. South Korea-based institutions have also been making headlines for their investments in direct real estate in Australia, the US and the UK, with a recent example being a consortium purchase of the London headquarters of Marks & Spencer for more than $340mn. 

Preqin’s Real Estate Online service tracks 41 South Korea-based investors that are active in private funds. Collectively, these investors have $1.8tn in assets under management, with $57bn allocated to real estate. Insurance companies make up the largest proportion (27%) of this investor pool, while public pension funds (24%), banks (20%) and investment companies (12%) make up the rest of the top four firm types. So what are the investment preferences of these unlisted fund investors? 

Funds employing the debt strategy are most attractive to Korean investors; 71% will consider investing in such vehicles. Sixty-nine percent of the investor pool has a preference for core vehicles while 57% favour core-plus funds. Forty-three percent of South Korea-based investors will target value added funds while 40% of them prefer opportunistic vehicles. It can be seen that Korean institutions in general prefer stable income-yielding properties over projects that come with developmental risks. 

In terms of geographic preference, South Korea-based investors have a home bias where 89% of the investor pool has an inclination to invest in Asia. Developed regions such as North America (65%) and Europe (54%) are also highly sought after by Korean investors. Twenty-seven percent of South Korea-based investors are interested in Australasia while 22% are open to investing in emerging markets. 

Over the next 12 months, half of South Korea-based investors looking to make new commitments will target core-plus vehicles while 44% will be open to funds employing either core or debt strategies. Interestingly, in terms of geographical regions, 59% of South Korea-based investors will be seeking opportunities in North America or Europe in the next 12 months. A noteworthy 45% will invest in the Asia-Pacific region. 

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