Figures from South Korea’s National Pensions Service (NPS) show the organisation’s investments within European real estate skyrocketed throughout 2022.
A report in Business Korea revealed the amount invested by the NPS into European and American real estate went up by 24.8% and 38.8% respectively over the period. According to the NPS, it is the third-largest pension fund in the world by assets, as well as the nation’s largest institutional investor.
The report said the NPS had made a fund disclosure earlier this week, revealing the aggregate value of its overseas properties rose to $25.09bn (€22.76bn) – up 22.7% compared with the end of 2019.
Business Korea wrote: “Analysing the investment allocation by geographical region, it becomes evident that investments in the Americas were the most significant portion at 38.8%. Subsequently, investments in Europe stood next highest with a share of 24.8%, while the combined total for Asia, including Australia, amounted to only 20.5%. Notably, other global investments accounted for 15.9% of the overall portfolio.”
“NPS investments in Europe have undergone a whopping 87% surge over the past three years,” it added. “This growth has been mirrored in the proportion, which has steadily risen from 16.3% to 24.8%.”
This news follows an admission by the NPS’s committee earlier this year that the fund could run dry by 2055, as birth rates fall within the nation. In 2021, the proportion of the population being at working age was 71.7%. However, this is expected to fall to a little over 50% by 2050. It is against this background that the NPS said it would start running at a deficit in 2041.
Despite this, research from the European Association for Investors in Non-Listed Real Estate Vehicles (Inrev) in January suggested that investors are expressing more concern over real estate allocations than their North American and Asian-Pacific peers.
As Expert Investor wrote back then, Inrev’s 2023 Investment Intentions Survey found more than a third (37%) of European investors plan to decrease allocations this year and next. In comparison, 20% of North American and just 5% of Asia-Pacific investors said that they similarly planned to decrease their allocation.
Overall, a quarter of investors plan to reduce their global allocations to real estate over 2023 and 2024. Aligned with a 27% share of investors saying that they plan to increase allocations over the same period, Inrev said that this portended a “muted outlook” for the industry.