South Korea's Financial Supervisory Service (FSS) warned on August 10 that overseas real estate public funds can result in a total loss of principal, despite being backed by physical properties. The regulator said complaints and dispute filings have continued in cases involving total principal losses, and cautioned that investors can lose all of their money even when property prices decline only slightly because these funds often use loans from local financial institutions. If those loans are not repaid on time, lenders can exercise collateral rights and force a sale of the property, with debt repayment taking priority over investor returns. The FSS also said dividend payments can be suspended through cash-trap mechanisms that redirect rental income to lenders when preset thresholds such as LTV or vacancy rates are breached. It added that some securities firms had marketed publicly offered overseas real estate funds to consumers as products that pay fixed interest, despite those risks. The warning adds to the FSS's broader investor guidance on overseas real estate funds, which has highlighted leverage, redemption limits, maturity extensions and suitability concerns as key risks for investors seeking principal preservation or short-term liquidity.