Korea Awaits Real Estate Mutual Funds

Real estate mutual funds are expected to be available on the market this year, the first time in Korea's financial history, the Ministry of Finance and Economy said Friday.

These funds are managed by investment companies that purchase property put up for sale by firms carrying out corporate restructuring.

These mutual funds allow investors to buy the real estate offered by these ailing companies.

"The real estate mutual funds are really paper companies and with the funds, investors can diversify their asset portfolios, such as commercial buildings or land for apartment complexes," said an official at the ministry.

Just as a single asset management company can handle a number of mutual funds, one real estate investment firm will be allowed to set up several real estate mutual funds. Since the funds are paper companies, they can be easily established and liquidated. If the funds' yields are short of shareholders' hopes at maturity, they can close down the paper companies by withdrawing their investment.

"We are driving to enact laws for the real estate mutual funds this year by revising legislation, including corporate restructuring vehicle laws," said the ministry official. Corporate restructuring vehicles, or CRVs, are special-purpose companies that are in charge of overseeing corporate restructuring.

by Oh Jung-hee