GLOBAL - SEB Asset Management has launched a fund that will invest exclusively in real estate investment trusts (REITs) in the Asia-Pacific region, with a focus on generating high levels of income.
The strategy of the SEB Asia Pacific REIT Fund is in response to widespread investor appetite for income and the fund manager claims it will target regular distributions "without exposure to unpredictable risks".
Thomas Körfgen, head of real estate equities at SEB, said: "Asian REITs combine high dividend yields from ordinary income with the appeal of the Asian property market," Körfgen said.
Fund manager Julian Mittag said institutional investors in the fund would likely see it as an equity play, rather than necessarily an allocation to real estate.
"They want yield, but without the risk curve." he said. "REITs are forced by law to pay out dividends. Even if it's small amounts, it isn't locked in."
"These are investors who wouldn't be able to afford to buy Asian real estate assets directly because of time and cash constraints. At the same time, if they invest in unlisted funds, they can't be sure the fund manager will be able to buy assets and, if they can, what those assets will sell for in three or four years' time."
SEB Asset Management believes distribution returns of 7% are currently possible. "This provides a new attractive alternative to supplement traditionally bond-heavy portfolios, in particular for investors such as institutions, foundations or family offices with a strong preference for high ordinary income," Körfgen said.
The German fund manager will use a qualitative and quantitative screening model to select REITs with attractive risk-return ratios, management and corporate governance track records.
The fund will also use a strict risk model that takes into account both property-specific data and corporate key performance indicator (KPI) data.
"Securities are selected according to our strict risk-return model, combined with the existence of an incentive-based REIT management system that rewards the creation of added value for shareholders," said Mittag.
"Growth must be purely economically motivated and should be reflected in higher earnings per share."