[Real Estate Solutions, PE Injection]② "Blind Method Requires Track Record and Performance Support"

Consensus Among Market and Experts on the Need to Establish Real Estate Blind Funds
Investors (LPs) Emphasize "Investment Substance and Business Feasibility Over Investment Format"

As consensus forms among the market and experts that the real estate market, currently concentrated on project investments, should shift to a blind fund approach suitable for risk diversification, it is expected that the formation of blind funds will become more active in the real estate industry going forward. As of the end of May, the blind fund commitments of Aegis Asset Management, the industry leader, stand at approximately 6.4 trillion KRW, accounting for about 30% of the firm's total real estate fund assets under management (around 22 trillion KRW). Since investors entrust their funds without knowing the specific investment targets, it is advised that a solid track record and performance are essential for proper blind fund management.

A senior official from real estate specialist Asset Management Company A explained, "The concept of blind funds was introduced to the domestic real estate market only recently," adding, "Ultimately, a blind fund requires the asset manager to have accumulated experience and proven capabilities so that investors can trust and entrust their money." This suggests that domestic real estate investment firms needed a period to accumulate experience to build a track record capable of managing blind investments. As operational experience accumulated, blind funds began to be introduced in specialized real estate investments about five to six years ago.

Among the market and experts, positive opinions about real estate blind funds prevail, but there is a subtle difference in perspective among limited partners (LPs). While the blind fund approach is seen as an appropriate means to alleviate the current market liquidity crunch, in the long term, LPs believe that enhancing business feasibility analysis capabilities is more important than changing investment methods.

The Chief Investment Officer of Pension Fund B stated, "The essence of the recent real estate project financing (PF) crisis lies less in the investors' investment methods and more in excessive borrowing during the low-interest-rate period, reckless project execution by business entities, and indiscriminate risk-taking by investors who followed suit," advising, "While investment methods and formats are important, greater attention should be paid to the substance of the investment." He added, "Investment methods should be flexibly selected according to each institution's experience, risk tolerance, return objectives, and current asset composition."

The Chief Investment Officer of Mutual Aid Association C pointed out, "The saying 'don't put all your eggs in one basket' emphasizes avoiding concentration risk, that is, diversification," and noted, "Blind funds have the disadvantage that LPs cannot know the investment targets in advance, and if multiple similar investment projects are included, the number of investments may increase but fundamental risks may not be diversified." He emphasized, "It is important to establish clear guidelines beforehand regarding the definition, structure, and conditions of investment targets for blind funds," adding, "Above all, the core is that the asset manager's capabilities and track record must be supported."