It’s been nearly 10 years since APN launched the APN Asian REIT Fund. While our track record ticks all the boxes in terms of length of tenure and beating our performance objectives, in our discussions with advisers we continue to face questions along the lines of ‘why Asia?’.
It’s a fair question. APN launched the APN Asian REIT Fund with a strategy that mirrored APN’s highly successful flagship Australian REIT Fund. The rationale for both was to reflect APN’s 20-plus year property-for-income philosophy and a robust, time-tested approach that delivers a stable, monthly income at lower-than-market volatility by focussing on property market fundamentals.
The performance and track record of the Fund has delivered just that. Since inception, the Fund has returned 11.57% pa1, with lower-than-market volatility. The current yield of 5.87%2 is also attractive in the current low interest rate environment.
The proposition of the APN Asian REIT Fund at the time of its launch was clear to us then and remains so today. Pandemic or not, the Asian region is one of the best structural growth stories in the world.
Already home to more than half the world’s population and half of its middle class, Brookings Institution estimates that by 2030 Asia will host 64% of the global middle class and account for over 40% of global middle-class consumption.3
Because the middle classes spend more on consumer products and services the growth in Asian consumer demand over the next decade will be huge.
The implications for economic activity and real estate demand are significant. The APN Asian REIT Fund is positioned to capitalise on this growth by investing in the key gateway cities of Singapore, Tokyo and Hong Kong. These global cities appeal to us because they’re magnets for global capital flows and investment. We also understand and value the impact on long term returns of location, demographic advantages and land shortages in these markets.
The size of this opportunity is also a key attraction. From a standing start in 2001 when the first Japanese REIT launched, the Asian REIT sector now has a combined market capitalisation of $308bn4, which dwarfs the Australian REIT market at $144bn4.
Add to it the REIT markets recently launched or close to doing so – namely India and China – and it’s obvious that in the next decade or so the Asian REIT market will be many multiples of what it is today. Slowly but surely, Australian advisors are coming around to the merits of the Asian REIT opportunity.
Not only does the APN Asian REIT Fund add geographic diversification to an investment portfolio, high quality commercial real estate in Asia’s global cities also offers an attractive running yield of 5.87%2. In our view, it also offers potentially higher capital growth relative to the domestic market over the long term.
That’s why we launched the APN Asian REIT Fund almost a decade ago. It’s also why we’re sticking with our income focused lower risk approach formulated over 20 years ago.
Australian investors wishing to diversify their income away from Australia to a region full of enormous opportunities and growth, may find the APN Asian REIT Fund very much to their liking.