Asian REITs outperform traditional strategies
Asian Real Estate Investment Trusts (REITs) provide more diversification benefits with stocks than listed real estate companies an Asian Pacific Real Estate Association (APREA) study has found.
That was the case in every Asian market except South Korea where the results were comparable, the report said.
Professor Graeme Newell, the report's co-author from the University of Western Sydney said retail investors traditionally sought access to property through listed real estate companies.
Newell said retail investors should consider a pan-Asia REIT strategy to capitalize on the liquidity from being listed and to gain access to high quality real estate investment portfolios.
APREA said Asian REITs had consistently outperformed their respective stock market returns since the global financial crisis while risk levels had also decreased significantly between June 2009 and April 2012.
The level of risk compared to respective stock markets revealed the asset classes defensive characteristics as well, the report said.
South Korea was the only exception as Asian REITs delivered better risk-adjusted returns than the stock market in every other Asian market.
Newell said the development of the Asian REIT market over the last decade was starting to take affect but investors still needed education.
"Many general investors still see REITs as growth stocks and are not fully aware of their strong income returns," he said.
He said there were still some issues in the regional REIT market including the development of a local market for China and India and the emerging markets of Indonesia, Vietnam and the Philippines.
As those markets matured, investment-grade commercial real estate assets would increase but work needed to be done on corporate governance, transparency and depth, according to Newell.
The study assessed the REIT markets of Japan, Singapore, Hong Kong, Malaysia, Thailand, Taiwan and South Korea.
Recommended for you
Infrastructure assets are well-positioned to hedge against global uncertainty and can enhance the diversification of traditional portfolios with their evergreen characteristics, an investment chief believes.
Volatility in US markets means currency is becoming a critical decision factor in Australian investors’ ETF selection this year.
Clime Investment Management is overhauling the selection process for its APLs, with managing director Michael Baragwanath describing the threat of a product failure affecting clients as “pure nightmare fuel”.
Global X will expand its ETF range of exchange-traded funds next month with a low-cost Australian equity product as it chases ambitions of becoming a top issuer of ETFs in Australia.
