Backed by a strong domestic stock market this year, the housing & urban fund earned close to 1.2 trillion won in revenue in the first half by managing surplus funds. It generated more than 800 billion won in revenue from domestic stock investments alone, far exceeding last year's full-year operating revenue.
On the 6th, according to materials submitted by Korea Housing & Urban Guarantee Corporation (HUG) to lawmaker Yun Jong-gun of the Land Infrastructure and Transport Committee from the Democratic Party of Korea, the housing & urban fund posted 1.1557 trillion won in revenue through surplus-fund management from January to June this year.
That is 1.9 times last year's full-year operating revenue of 614.2 billion won.
Most of the revenue came from domestic stocks. Revenue from domestic equity-type assets was 803.7 billion won, 3.5 times last year's full-year revenue of 232.8 billion won. Overseas equity-type investments also produced 227.9 billion won in revenue.
In contrast, revenue from domestic bond-type investments was 20.8 billion won, and overseas bond-type was 3.3 billion won. Alternative investments generated 52.2 billion won in revenue.
HUG views the gains as driven more by this year's KOSPI rally lifting returns than by an aggressive increase in investment weights.
An HUG official said, "The fund invests through asset managers according to predetermined asset allocation," adding, "The sharp increase in domestic stock revenue this year is largely due to the favorable stock market rather than a shift to a more aggressive strategy."
As of the end of July this year, the housing & urban fund's overall operating return was 5.71%, 1.66 percentage points above the target return of 4.05%. The return on domestic equity-type assets reached 71.60%.
Of total surplus funds, domestic equity-type assets amounted to 900 billion won, or 7.0%. Domestic bond-type was the largest at 7 trillion won (52.0%), followed by alternative investments at 2.3 trillion won (17.1%), overseas equity-type at 1.3 trillion won (9.4%), and overseas bond-type at 700 billion won (5.1%).
The housing & urban fund is formed with resources such as subscription savings and housing bonds and is used for dwellings purchase and jeonse loans and public dwellings supply. Because it is based on liability-type resources such as subscription savings that can be terminated at any time and housing bonds with maturities, HUG said it is difficult to invest aggressively for the long term like the National Pension Service.
Despite the high investment revenue, the fund's surplus funds themselves have shrunk significantly in recent years.
The housing & urban fund's surplus funds fell from 49 trillion won in 2021 to 28.7 trillion won in 2022, 18.9 trillion won in 2023, and 10.1 trillion won in 2024. They rebounded to 14.4 trillion won last year, but stood at 13.5 trillion won as of the end of July this year.
Compared with 2021, that is a decrease of 35.5 trillion won, or 72.4%, over five years.
HUG cited reduced inflows into the fund through subscription savings and housing bonds, alongside an increase in policy loan supply, as reasons for the decline in surplus funds.
In fact, the amount raised for the fund through subscription savings fell from 23.1 trillion won in 2021 to 14.8 trillion won in 2024 before inching up to 15.2 trillion won last year. Revenue from housing bonds also declined from 18.8 trillion won in 2021 to 13.4 trillion won in 2023, then recovered to 15.2 trillion won last year.
An HUG official added, "While subscription savings declined and the real estate slump reduced revenue from housing bonds, fund expenditure increased as policy loan supply expanded," noting, "Starting in 2024, special newborn loans were also supplied."
However, HUG says the current surplus funds are not below the level needed for fund management. Considering short-term funds, illiquid assets, and liability repayments, it views an appropriate surplus level at about 8 trillion won, and as of the end of July this year, surplus funds were 13.5 trillion won, 5.5 trillion won above that.