US rate hike talk alters Korean fund’s US property investment strategy
Sep 12, 2016 (Gmt+09:00)
POBA, with $8 billion in assets under management, sees that core properties in large cities have reached peaks and a possible rate hike by the U.S. Federal Reserve would drive office building prices lower.
According to investment banking sources on September 9, POBA will commit $40 million to the Invesco U.S. Income Fund that purchases residential properties such as apartments and commercial facilities, including warehouse centers, in major or second-tier cities in the United States.
The Income Fund, launched in 2013, has been buying residential houses in southern cities of the United States. Limited partners of the fund are known to have earned more than a 5% return a year from rental incomes alone. The fund has set the loan-to-value ratio of investment assets at below 50% and offers a fixed rate, minimizing the risk of a decrease in returns in case of an interest rate increase.
“Returns from the fund have not been bad. But now external risk factors such as a rate rise have changed, we started employing a new investment strategy,” a POBA source told the Korea Economic Daily.