REAL ESTATE - Deutsche Börse announced last week that it will launch an index covering real estate investment trusts (REITs). The stock exchange will also launch a separate segment for the asset class "as soon as the first REIT is introduced".
The announcement follows the recent introduction of REITs-enabling legislation in Germany.
In a press statement, the bourse said the index and the segment would "raise the profile of REITs as an asset class in stock exchange trading".
However, John Davies, senior director of market development at Standard & Poor’s, has expressed concern about indices acting as benchmarks for cross-border categories. "The issue with REITs is that a number of organisations created indices to raise awareness of the product and these have become benchmarks – even though the REIT indices are just not consistent because they have different parameters for different geographies," he told IPE Real Estate recently.
The bourse will calculate two separate indices. The All-Share Index will be accessible to German and foreign REITs. The 20 most liquid will then appear in the RX index.
Frédéric Ducoulombier of the EDHEC Risk & Asset Management Research Centre also pointed to concerns over diversification in REITs indices.
"While commercial property indices computed from the appraisal values of thousands of real estate assets appear to be sufficiently diversified, the same cannot be said of indices based on the share price of companies investing in property," he said.
"In spite of the rapid growth of the listed real estate market, the sector currently represents but a fraction of the overall investable property universe. At the country level, it is nonsensical to compute an index of listed property companies in most European countries, given the scarcity of eligible components."
In separate news, Dutch pension fund ABP has triggered a London stock exchange notification after apparently upping its share in Land Securities, a REIT, to around 5%. A spokesman said: "We can only go on what they tell us – but my guess is that they increased their shareholding some time ago and then forgot to tell anyone."