[Exclusive] Financial Supervisory Service Intensifies Inspection of Real Estate Defaults... First Target Among Asset Management Firms is Aegis

Financial Supervisory Service Begins Inspection of Korea's No.1 Real Estate Specialist Aegis Asset Management
On-site Investigation Completed Late Last Month, Additional Data Requests Underway
Lee Bok-hyun: "Focused Management Amid Market Uncertainty"...Risk Assessment Efforts

The Financial Supervisory Service (FSS) has confirmed that it has begun an inspection of Aegis Asset Management, the country's leading real estate specialized asset management company.

According to the financial investment industry on the 6th, the FSS is currently conducting an inspection, including an on-site investigation of Aegis Asset Management. This is not a regular inspection. An FSS official stated, "The company is selected for inspection based on various issues such as detection of abnormal signs or potential problems," adding, "The inspection of Aegis Asset Management is not being conducted as part of a regular inspection." It is believed that Aegis Asset Management was chosen as the first inspection target because it is the largest real estate fund specialized company in the country. The FSS official explained, "Since it handles many real estate funds, we looked into the funds, etc." The on-site investigation was completed at the end of last month, and it is reported that additional data requests are currently underway.

Lee Bok-hyun, Governor of the Financial Supervisory Service, is attending the 'FSS Governor-Securities CEO Meeting' held at the Korea Financial Investment Association in Yeouido, Seoul, on the 2nd, delivering opening remarks. On this day, Governor Lee urged, "Please thoroughly inspect risks in preparation for potential risk factors such as the realization of real estate PF defaults and the recurrence of instability in the short-term money market, and ensure thorough risk management by firmly establishing effective contingency plans." Photo by Yoon Dong-joo doso7@

In its inspection operation plan for this year, the FSS announced that it will conduct regular inspections of four financial investment firms and carry out 98 ad-hoc inspections. The keyword for this year's inspections is checking for real estate project financing (PF) insolvency. When announcing this year's work plan, FSS Governor Lee Bok-hyun stated that they would focus on managing market instability. At a meeting with securities company CEOs held by the Korea Financial Investment Association on the 2nd, he also urged, "Please thoroughly manage risks by closely examining potential risk factors such as the realization of real estate PF insolvency and the recurrence of instability in the short-term money market, and by firmly establishing effective contingency plans."

Aegis Asset Management is a real estate specialized asset manager. As of the end of last year, the scale of real estate assets under management was 24.0448 trillion KRW, ranking first among asset management companies. The gap with the second-ranked Samsung SRA Asset Management (12.2612 trillion KRW) and third-ranked Mirae Asset Management (11.567 trillion KRW) is about twice as large. Its position is also solid in the global market. It has achieved the record of being the "No. 2 in Asia for real estate AUM" among global asset managers for two consecutive years. According to the 'Global Investment Managers 2022' report published by the global real estate research institution IREI (Institutional Real Estate, Inc.), as of the end of 2021, Aegis Asset Management's Asia real estate AUM was $33.25 billion, a 23% increase from $26.94423 billion in 2020, ranking second in the world after Singapore's GLP (Global Logistic Properties).

Its profitability is also excellent. NICE Investors Service evaluated Aegis Asset Management by stating, "Based on its market position as the No. 1 domestic real estate asset management company, it has secured an excellent business foundation," and "It demonstrates outstanding profitability based on the increase in assets under management and fee income, with an average return on assets (ROA) of 18.6% over five years (2017?2021), which is excellent due to the growth in assets under management and related fee income."

However, there are concerns that the high proportion of proprietary asset investments requires scrutiny of changes in the value of investment assets. NICE Credit Rating stated, "Proprietary asset investments consist of real estate collective investment securities and unlisted stocks set by the company and other financial companies, mainly domestic office, complex facilities, residential real estate project financing (PF) development projects, and tangible real estate," adding, "Given the ongoing domestic and international economic uncertainties, if the recovery of investment assets is delayed due to a downturn in the real estate market, it could pose a burden on the company's financial stability."

Industry insiders interpret that "The FSS is conducting risk checks focusing on places with many real estate assets, and as part of this, it supervised Aegis Asset Management." The FSS side stated, "We are inspecting Aegis Asset Management, and if there is demand for inspections sequentially, we will proceed with inspections of other asset management companies as well."

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