The Financial Supervisory Service said it will introduce a focused review system for overseas real estate funds to run a seamless review regime from the product design stage for overseas real estate fund products.
The Financial Supervisory Service (FSS) said on the 4th it held a meeting at its Yeouido headquarters with the CEOs of six asset management firms that primarily handle overseas real estate funds and the Deputy Minister in charge at the Korea Financial Investment Association, and discussed these matters.
First, it shared the findings of a recent inspection of internal controls in the design and manufacturing stages, while presenting improvement measures to embed the "investor-first principle" and exchanging views.
The inspection found that criteria for selecting local asset management firms were insufficient, and there was a tendency to assess key investment reference indicators such as interest rates and vacancy rates optimistically without reasonable grounds.
It also found that the industry remains inadequate in building investor-centric self-verification systems and in accurately identifying and communicating investment risks.
Based on the inspection results, the Financial Supervisory Service (FSS) made it mandatory to attach due diligence inspection reports when submitting fund registration statements. In addition, it prepared a standard template for key investment risk disclosures so that related risks—such as loan-to-value (LTV) ratios and refinancing special conditions—can be intuitively understood from the investor's perspective.
While pushing improvement measures centered on scenario analysis disclosures that allow investors to grasp at a glance the investment outcome in a worst-case situation, it also decided to introduce a focused review system for overseas real estate funds by designating multiple reviewers and raising the approval authority level.
The asset management industry and the Financial Supervisory Service (FSS) shared the understanding that to meet investors' heightened expectations, the investor-first principle must function in practice in the field, and agreed to continue communicating and cooperating so it works effectively from the design stage.
Based on these improvements, the Financial Supervisory Service (FSS) will provide guidance and oversight to relevant managers and strictly reflect them in future reviews of overseas real estate funds. It will also prepare measures to define the roles of managers and distributors and to clarify where responsibility lies and its scope, so that investment risks are handed over without omission, and will gather industry feedback.
An official at the Financial Supervisory Service (FSS) said, "We will finalize the improvement measures with sufficient input and a balanced consideration of industry impact, and implement them promptly."