Asian real estate investment trusts (REITs) and property development stocks can in combination optimise returns, yield attractive dividends and hedge against financial volatility, says Eastspring Investments.
REITs' recurring income reduces portfolio volatility, while property stocks can boost a portfolio's capital returns, said Pearly Yap, a Singapore-based portfolio manager at Eastspring.
Based on a model investment portfolio, 64% of investments should be allocated to REITs, with the rest apportioned to property stocks, Mrs Yap said.
There have been strong long-term returns for REITs in Singapore, Hong Kong, Australia and Japan, she said.
For instance, the five-year return is 12.8% for Hong Kong REITs and 6.6% for Singaporean REITs, higher than the 5.4% global average for REITs.
Despite concerns about Chinese investors purchasing global properties and driving up property share prices, Eastspring has a long-term investment view and Asian policymakers have introduced macroprudential measures to curb property speculation, Mrs Yap said.
Limiting the loan-to-value ratio and restricting second-home purchases are some of the measures seen across Asia, she said.
Somjin Sornpaisarn, chief executive of TMB Asset Management (TMBAM Eastspring), said property prices in Thailand have reduced since the Bank of Thailand announced tighter mortgage requirements, which will take effect on April 1.
Eastspring, the Asian asset management business of Prudential Plc, finalised its 65% acquisition of TMB Asset Management from TMB Bank in October 2018.
Eastspring has an option to increase ownership to 100% in the future and has entered into a distribution partnership with TMB Bank, Thailand's seventh largest bank by assets.
TMBAM Eastspring will launch an initial public offering (IPO) for the Asia-Pacific Property Flexible Fund during Jan 21-29, with a minimum investment sum of 1,000 baht.
The minimum investment sum falls to 100 baht after the IPO subscription period ends.
Average investment return is expected to be 6-8% before deducting expenses, and investors are required to invest in the fund for at least three years.
The fund has a policy to invest in REITs and equities of listed companies in the property sector in Asia-Pacific.
The fund will allocate 65% of investment sums to REITs, with the rest allotted to real estate equities.
The fund's flexible investment policy in REITS and real estate equities means lower investment risk, Mr Somjin said.
Stock valuation in emerging markets is at an attractive price threshold and the outlook remains interesting for investment, he said.
TMBAM Eastspring's assets under management (AUM) are worth 378 billion baht. The company's AUM ranked fifth among asset management companies in Thailand last year.
This year's AUM is expected to rise from 2018, with an increase in asset classes and the company's long-term investment policy, Mr Somjin said.