Property-based mutual funds best investment option for now, say analysts

Over the past eight months, foreign investors pulled out of these mutual funds as they were affected by the Covid-19 fallout.

Thidasiri Srisamith, Kasikorn Asset Management’s chief investment officer, said property funds, REITs and infrastructure funds are a good choice at this time, except funds that invest in hotels and convention centres, because those are still affected by the Covid-19 fallout.

“Kasikorn is still positive about investing in property funds and REITs in Thailand and Singapore despite the high volatility and 8.81 per cent drop in REITs’ returns as of July 31,” she said. “However, returns over the past three years rose by 6.71 per cent, and 7.83 per cent over the past five years.”

She said the K Property Sector Fund (K-Prop) has boosted its investments from 50 per cent to 70 per cent in Singapore REITs and reduced its investment to 30 per cent in Thai REITs, because though the Thai real-estate funds can add more assets, the state of the fund depends very much on asset owners and market conditions.

“Kasikorn Asset Management is planning on establishing new funds to boost investment, while asset companies that our REITs have invested in are still able to pay dividends. This shows that these companies are still able to manage well during this crisis,” she said.

She added that two REITs had been established after the government eased lockdown measures, namely Prospect Logistics and Industrial Leasehold Real Estate Investment Trust (PROSPECT) worth Bt3.5 billion, which has generated returns worth 11.1 per cent in the first year, and Khonburi Sugar Power Plant Infrastructure Fund (KBSPIF) worth Bt2.8 billion, which has generated 8.95 per cent worth returns in the first year.

“Since the market is facing volatility and interest rates will remain low for the next two years, this is a good opportunity to invest in REITs to generate consistent returns in the long term,” she added.

Meanwhile, Chayanee Juengmanon, a senior research analyst at Morningstar Research, said over the past eight years, property funds' assets under management had dropped by 18.8 per cent to Bt150 billion due to a drop in returns and having to come up with about Bt11 billion for redemption, adding that even though some asset companies are performing better than they did in the first quarter, the situation has not returned to normal yet.

“Over the past two years, up to Bt100 billion flowed into these funds because they were attractive to investors as they generate returns,” she said.

“However, the Covid-19 outbreak has made its returns since March to contract up to 18 per cent as some assets, such as department stores, hotels, office buildings and factories have been badly affected by lockdown measures.”