A Study on the Retirement Pension Portfolio Using Real Estate Indirect Investments in Korea

Abstract

Purpose: This study empirically analyzed the portfolio of retirement pension using real estate indirect investments,after identifying the problems through interviews with experts related to retirement pension, improvements wereproposed. Increasing the proportion of real estate indirect investment will be a way to solve the problem of lowreturns on retirement pensions in Korea. Research design, data, and methodology: In order to conduct the study, first of all, based on Markowitz’s portfoliotheory, the correlation between representative index (benchmark index) by asset and indirect investment products ofreal estate that can be selected in domestic retirement pension was analyzed. After that, Optimal portfolio wasderived by simulating and analyzing the portfolio consisting of representative indices and products. Results: The correlation analysis was conducted by selecting the representative index of investment assets and theindirect investments of real estate as variables showed that REITs and real estate ETFs distributed the risk ofretirement pension portfolio. And as a result of analyzing the optimal portfolio including K-Top REITs andShinhan-Alpha REITs, the standard deviation was lower and the yield was higher than that of the traditional portfoliothat does not include real estate indirect investments, so both stability and profitability were derived in positiveresults in portfolio that includes real estate indirect investments. Implications: The proportion of real estate indirect investments in the portfolio of retirement pensions should beincreased. As examined in previous studies at home and abroad and pension fund management, it was found thatthe portfolio including real estate assets has reduced risk and increased profits, and as a result of the analysis ofoptimal portfolio, high-achieving were derived from profitability and stability in the portfolio in which real estateindirect investments were incorporated. Increasing the proportion of real estate indirect investments will be a way tosolve the problem of low returns on retirement pensions in Korea.