Domestic Trust Companies' Assets Under Custody Surpass 1,000 Trillion Won... Real Estate Trusts Surge by 46 Trillion Won

[Asia Economy Reporter Ji Yeon-jin] The total assets under management (AUM) of domestic trust companies have surpassed 1,000 trillion won. Although the growth of money trusts has slowed due to the Lime fund redemption suspension incident and an increase in direct investments amid a booming stock market, the scale of real estate trusts has expanded significantly.

A trust is an investment method where a trust company (trustee), such as a bank, manages and operates assets like money or real estate on behalf of clients (settlors) who own these assets, and later transfers the assets to designated beneficiaries.

The Financial Supervisory Service (FSS) announced on the 30th that as of the end of last year, the total AUM of 61 domestic trust companies recorded 1,032.3 trillion won, an increase of 68.1 trillion won (7.1%) compared to the end of the previous year.

The banks’ AUM stood at 492.7 trillion won, and securities companies at 244.3 trillion won, increasing by 2.6% (12.3 trillion won) and 4.9% (11.4 trillion won) respectively compared to the previous year, while insurance companies’ AUM decreased by 12.3% (2.5 trillion won) to 17.9 trillion won. On the other hand, the AUM of real estate trust companies surged by 46.9 trillion won (20.3%) to 277.4 trillion won compared to the end of the previous year.

Among real estate trusts, collateral trusts (234 trillion won) recorded the steepest growth, increasing by 40.4 trillion won (20.9%). This is presumed to be due to a sharp rise in mortgage loans following 'Yeongkkeul' (borrowing to the limit) home purchases amid soaring real estate prices. Land trusts (77.9 trillion won) and disposal trusts (6.7 trillion won) increased by 7.2 trillion won (10.2%) and 400 billion won (6.3%) respectively. Management trusts (15.5 trillion won) decreased by 200 billion won (1.3%).

Trust fees totaled 1.9446 trillion won, down 378.6 billion won (-16.3%) from the previous year. Fees from specific money trusts were 992.3 billion won, decreasing by 371 billion won (-27.2%), and fees from real estate trusts (835.3 billion won) fell slightly by 3.9 billion won (-0.5%). An FSS official analyzed, "Since last year, concerns over private equity fund incidents and increased direct investments by investors, along with banks’ cautious sales due to market volatility and risks, have influenced this decline."

By sector, banks held a 47.7% market share, down 2.1 percentage points from the previous year, while real estate trust companies increased their share by 3 percentage points to 26.9%. Securities companies accounted for 23.7% (+0.5%p), and insurance companies 1.7% (-0.4%p).

The FSS stated, "Despite the COVID-19 crisis, trust companies showed solid business performance with steady growth in retirement pension trusts and real estate collateral trusts, resulting in increased AUM," but also warned, "There is concern that the profit base may deteriorate compared to the external growth of the trust industry due to the recent low interest rate environment and increased financial market volatility."

The FSS plans to strengthen analysis and inspection of financial soundness and liquidity risks for real estate trust companies, which are sensitive to real estate market fluctuations. Additionally, through detailed analysis of products included in specific money trusts, it will closely monitor rapid short-term sales increases, concentration in specific products, and risk factors of newly included products to respond to market changes.

This content was produced with the assistance of AI translation services.