2023-05-11 13:04:20
As the real estate market freezes
Rapid increase in the number of subscription passbook cancellations
Fund outflow from fund managers
Frequent asset sales in a hurry
“It is a very frustrating situation for the management company as funds are withdrawn every month even if it produces results.”
A representative of an management company in charge of the Housing and Urban Fund, which is considered a ‘big fish’ in the external consignment management (OCIO) market, expressed this. This happened as the enthusiasm for new housing subscriptions cooled recently and the amount of spare money in the housing fund drastically decreased.
According to the Ministry of Land, Infrastructure and Transport on the 11th, the amount of operating funds of the Housing and Urban Fund, which was 50 trillion won in the first quarter of last year, decreased to 35 trillion won in the fourth quarter of last year. It is estimated that the rate of outflow of funds has accelerated this year and has fallen below 20 trillion won. OCIO is to outsource the role of Chief Investment Officer (CIO) of institutional funds such as public funds and mutual aid associations. The Ministry of Land, Infrastructure and Transport selected Mirae Asset Global Investments and NH Investment & Securities last year as the leading companies to manage the funds of the Housing and Urban Fund. They divide asset classes into domestic and foreign stocks, domestic and foreign bonds, and alternative investments, select managers, and form a kind of team to manage funds.
However, as the size of the Housing and Urban Fund has shrunk significantly in recent years, management companies are getting more anxious. First of all, as fund funds flowed out like the ebb tide, management profits plummeted. Consignment management company A has reduced its bond management funds by a third, from 1.5 trillion won last year to 500 billion won recently. Stock management funds also decreased by less than half from 200 billion won to 70 billion won recently. It is known that the compensation that managers receive through bond management is around 10bp (1bp = 0.10%).
If the cancellation of subscription bankbooks increases rapidly, these management companies must urgently sell stocks or bonds they already hold and repay them in cash. In the process, it may affect the market, such as a fall in stock prices.
An official from management company A said, “Regardless of market conditions, we are faced with a situation where we have to reduce our holdings.”
B management company in charge of bonds also saw its housing and city fund operating funds drop by 80 percent from 1.7 trillion won last year to 350 billion won recently. An official from the company said, “We are selling bonds every month and repaying them in cash.”
The largest part of the fund’s finances is the national housing bond purchased when purchasing a house and the amount paid for subscription savings. The problem is that the conditions continue to make it difficult for the fund to increase further.
When the housing market revives, fund income also increases. However, it is highly likely that fund income will decrease as the real estate market freezes due to concerns over high interest rates and credit crunch. In addition, the interest rate for subscription bankbooks is only 2.1% per annum, which is significantly lower than market interest rates. According to the Korea Real Estate Agency, the number of subscribers to subscription accounts nationwide has decreased by nearly 1 million to 26,057,127 as of the end of March this year following peaking in June last year (27,031,911).
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