INVESTOR RADAR: Regulations align for Korea Post

Domestic insurance rules are making overseas fund investing more palatable for Korean investors, such as Korea Post which is lining up US fund investments for the first time.

Last week, PERE revealed that Seoul-based investor Korea Post was selecting investment managers for its debut investment into US core and core-plus real estate funds.

The insurance division of the state-owned investor was planning to commit a total of $400 million across the two strategies. Korea Post will commit to two funds: one with a core strategy and one with a core-plus strategy. It plans to commit $100 million to each investment manager.

The move from Korea Post comes shortly after regulatory adjustments in Korea's insurance rules that are making overseas fund investing easier for such institutions.

South Korea's Financial Services Commission (FSC) decided in late 2015 to ease restrictions on the insurance sector in order to revitalize the sector’s investment programs. The relaxation of these rules came in response to an environment of low interest rates, and amid the economic slowdown and ongoing uncertainty in Korea, one former FSC staffer told PERE.

“Previously Korean regulation viewed any investment in real estate as speculative activity and because of that there were a lot of restrictions on investing in any type of real estate,” he said.

However, the FSC has recently made amendments that will see it move away from a rigid regime of strict pre-screening, to one that gives insurance companies more autonomy over the investment process. As such, insurance companies investing in foreign currency-denominated funds are no longer subject to the mandatory requirement of receiving deliberation by the regulator’s investment committee.

According to CBRE research, the total overseas investment volume from Korea was recorded at approximately $7 billion last year, which is about 100 percent growth year on year.

“Current market at home is very saturated and they [Korean insurers] need a better yield which they can get from overseas real estate. They also need to diversify their portfolios, not just geographically but across the risk spectrum and in different asset classes within real estate. This trend [of more overseas fund investing] won't end soon, it will carry on for some time,” explained the former regulator.