Korean Pension Fund Bumps RE Allocation to $800M, Eyes U.S.

South Korea’s National Pension Service, the world’s fifth-largest pension fund, will allocate more than $800 million to acquire overseas real estate this year, and will increase the proportion of its real estate investments that are in the United States, according to Reuters. This amount will approximately double the fund’s 2007 investments in overseas real estate; NPS only began investing in foreign real estate in 2006.  

Three weeks ago, the Financial Times reported that NPS had decided to no longer buy U.S. Treasuries, because of low yields. The newspaper quoted NPS head of global investments Kwag Dae-hwan as saying, “It is difficult to buy more U.S. Treasuries because the portion of our Treasury investment is already too big and Treasury yields have fallen a lot.… We need to diversify our portfolio.�  

According to the Reuters story, NPS is moving into overseas properties because the global slowdown offers opportunities to buy assets relatively inexpensively and achieve higher returns.  

Dan Fasulo, managing director at Real Capital Analytics, told CPN that South Korea is roughly in the middle of the curve in starting to look at overseas real estate. Singapore was a leader in this, and other Asian nations are very likely to follow, he said. “There is no question that at some point the Asian countries would start to diversify into other asset classes…. There’s definitely a structural change in the way that [Asian] governments are thinking about their investments.�