HONG KONG, 02 March 2018 – Admiral Investment released a report on the Asia Pacific REITs today. Since 2015, Admiral Investment has reported regularly on the long-term performance of Asia Pacific and Asian REITs against other asset classes that are commonly considered by institutional and individual investors. Including 2017 data, the per annum long-term average total returns of Asia Pacific REITs and Asia REITs have reached 11.69% and 9.55% respectively.
Victor Yeung, Chief Investment Officer at Admiral Investment said, "The findings in the report continue to support that AP and Asian REITs have higher Sharpe Ratios than equity and REITs in other region and can provide diversification benefits to investors. Therefore, by adding the asset class to the portfolio, investors can reduce return volatility and increase medium to long-term return."
In the report, Admiral also pointed out that the interest rate environment has led to weak performance for bonds in the 1, 3, and 5 year time scale, while REITs in most regions have performance at or above their long term trends. The fact that REITs have income streams that grow during economic expansion is a strong reason that it outperforms bonds during an interest rate upcycle.
Admiral also stated that the dividend income of AP REITs have increased by more than 10% in 2017, which bought the dividend yield up from 4.40% in 2016 to 4.68% in 2017. Admiral believed that this is another piece of empirical evidence that REITs have positive price return during times of interest rate increase, as long as rental income are rising.
In view of the recent market volatility, Victor Yeung said, "the recent market volatility is generated by concerns of higher inflation, which may lead to a more rapid increase in interest rates. Since income of REITs are highly correlated with inflation, we believe that a higher inflation can help REITs to grow their earnings faster and be more desirable than other cash yielding asset classes."
In addition, the average market capitalization of Asia Pacific REITs has reached USD 1.35 billion, representing a 4-time growth from 0.32 billion in 1999. Asia Pacific REITs now have 245 names and a total market cap of over USD 320 billion implying that Asia Pacific REITs have matured into a standalone sector.
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