Kotak AMC launches International REIT Fund of Funds

Kotak Mahindra Asset Management Company (KMAMC), a wholly-owned subsidiary of Kotak Mahindra Bank, having approximately 34 lakh investor folios in various schemes as of September 30, has come out with India’s first international REIT fund of funds.

Kotak International REIT fund of funds is an open-ended mutual fund scheme, which will invest in units of Sumitomo Mitsui Asset Management (SMAM) Asia REIT Sub Trust Fund. The new fund offer (NFO) opens for subscription on December 7, 2020, and is scheduled to close on December 21, 2020.

This mutual fund scheme will have a diversified investment portfolio comprising of listed REITs, which will invest in real estate projects like residential, office, data centres, warehousing, retail, and hospitality. For the uninitiated, real estate investment trusts (REITs) are publicly-traded companies that either own and operate or finance income-generating real estate. Investors can buy the shares of these companies and receive dividends in return.

SMAM Asia REIT Sub Trust Fund is one of the largest Asia Pacific (excluding Japan) REIT funds, investing in listed REITs in the Asia Pacific region. This strategy is to invest in REITs (ex J-REITs) with higher dividend yields than those of other regions by bottom-up REIT stock selection. It is managed by Sumitomo Mitsui DS Asset Management Company Limited, which has a significant portfolio of listed real estate investment trusts in Singapore, Australia & Hong Kong. Since its inception in September 2011, the fund has generated a return of 102.5 per cent and in the last six months ending October 2020, it has given a return of 0.6 per cent.

Who should invest?

REITs typically provide high dividends plus potential for moderate, long-term capital appreciation. Long-term total returns of REIT stocks are more or less similar to those of value stocks. Since they provide strong dividend income, REITs are an important investment, both for retirement savers and for retirees, who require a continuing income stream to meet their living expenses. There is also a relatively low correlation of listed REIT stock returns with the returns of other equities and fixed-income investments, which makes REITs, a good portfolio diversifier.