Kotak International REIT Fund of Funds - Focusing on Global Real Estate Investments

Dec 12, 2020

Are you an investor who has an investment preference for Real Estate?

Have you thought of an avenue that can offer you an opportunity to invest in Real Estate segment across the global markets?

If yes, then here is one new fund offering that might of interest to you.

Kotak International REIT Fund of Funds

Kotak Mahindra Mutual Fund has launched Kotak International REIT Fund of Funds, India's first diversified REIT mutual fund.

It is an open ended fund of fund scheme investing in units of SMAM ASIA REIT Sub Trust fund and/or other similar overseas REIT funds.

The investment objective of the scheme is to provide long-term capital appreciation and income by investing in units of SMAM ASIA REIT Sub Trust fund and/or other similar overseas REIT funds. However, there can be no assurance that the investment objective of the Scheme will be realized

How does REITs Work?

Source: Product Presentation - Kotak International REIT Fund of Funds


REITs or Real Estate Investment Trust is formed as a company that owns, operates, or finances income-generating real estate projects. REITs hold exposure across a range of real estate segments, such as residential, offices, hotels, hospitals, warehouses, data centres, logistics, etc.

Like mutual funds REITs pool capital from several investors in order to invest in real estate segment, and aim to generate Rental Income and Capital Appreciation from the investments in real estate segments.

REITs allow Individual investors to participate in the growth of the real estate market without having to buy, manage, or finance any properties themselves. The units of REITs are publicly traded on a stock exchange.

Table 1: Details of Kotak International REIT Fund of Funds

Type An open ended fund of fund scheme investing in units of SMAM ASIA REIT Sub Trust fund and/or other similar overseas REIT funds Category Fund of Fund
Min. Investment Rs 5,000 and in multiples of Re 1 thereafter Face Value Rs 10/- per unit
Plans
  • Direct
  • Regular
Options
  • Growth
  • Dividend (Payout and Reinvestment)
Entry Load Not Applicable Exit Load
  • Redemption within 1 Year: 1%
     
  • Redemption after 1Year: Nil
Fund Manager Mr. Arjun Khanna Benchmark Index S&P Asia Pacific ex Japan REIT Total Return Index
Issue Opens: December 7, 2020 Issue Closes: December 21, 2020
(Source: Scheme Information Document)


Investment Strategy: Kotak International REIT Fund of Funds

Kotak International REIT FOF is a Fund of Fund that will predominantly invest in Units of 'SMAM ASIA REIT Sub Trust fund' and/or other similar overseas REIT funds. The AMC may in the interest of investors, decide to shift full or part of the investments made in the above schemes to any other overseas mutual fund schemes that invest in global REIT.

The underlying 'SMAM ASIA REIT Sub Trust fund' is an open-ended series trust of SMAM Global Investment Trust, established & authorised in Cayman Islands as a mutual fund in terms of mutual fund law by the Cayman Islands Monetary Authority. The fund is thus domiciled in Cayman Islands.

Under normal circumstances, the fund's asset allocation pattern will be as under:

Table 2: Asset Allocation of Kotak International REIT Fund of Funds

Instruments Indicative Allocation (% of net assets) Risk Profile
Minimum Maximum High/Medium/Low
Units of SMAM ASIA REIT Sub Trust Fund# and/or other similar overseas REIT funds 95 100 High
Debt and money market instruments* and/or units of debt/liquid schemes of Domestic Mutual Funds 0 5 Low to Medium
#The Fund will invest at least 95% of its net assets for investment in units/share class of SMAM ASIA REIT Sub Trust and/or other similar overseas REIT funds.
The Scheme can invest in any share class of the SMAM ASIA REIT Sub Trust Fund and/or other similar overseas REIT funds.
*Money Market instruments includes commercial papers, commercial bills, treasury bills, Government securities having an unexpired maturity up to one year, call or notice money, certificate of deposit, usance bills, and any other like instruments as specified by the Reserve Bank of India from time to time.
(Source: Scheme Information Document)


The primary investment objective of Kotak International REIT Fund of Funds is to provide long term capital appreciation & income by predominantly investing in units SMAM ASIA REIT Sub Trust fund and/or other similar overseas REIT funds.

The Scheme may also invest a certain portion of its corpus in debt and money market securities and/or units of debt/liquid schemes of Mutual Funds, in order to meet liquidity requirements from time to time.

The scheme may also invest in listed/unlisted and/or rated/unrated debt or money market securities, provided the investments are within the limits indicated in the asset allocation pattern. Investment in unrated debt securities will be made with the prior approval of the Board of the AMC, provided the investment is in terms of the parameters approved by the Board of the Trustee.

Exposure of Listed REITs In India is majorly in Office sector in 5-6 cities. Kotak International REIT FOF offers exposure to varied REITs across geographies through the underlying SMAM ASIA REIT Sub Trust fund.

Key Features of SMAM ASIA REIT Sub Trust:

  • - Attractive dividend yields

  • - Selective REIT investment by bottom-up approach

  • - Focus on profit growth, dividend yield, valuation, and market liquidity.

  • - A combination of Asian REITs (mostly in Singapore and Hong Kong) and Pacific REITs (mostly Australian REITs)

  • - Experienced REIT Investment Team

  • - Portfolio managers specialized in REITs and property stock investments are in charge, and managing multiple REIT funds.

  • - 10 professionals covering the Asia and Pacific REITs market.

As of October 2020, the underlying fund had country wise allocation to Singapore (48.8%), Australia (33.7%), Hongkong (9%), New Zealand (3.1%), Thailand (1.2%) India (0.9%), Malaysia (0.5%), Cash (2.8%).

Top 10 Portfolio Holdings (as of October 2020)

Source: Product Presentation - Kotak International REIT Fund of Funds (SMDAM -October 2020)


​About SMDAM

Sumitomo Mitsui DS Asset Management Company Limited (SMDAM) has global presence with offices in Tokyo, London, NewYork, HongKong, Singapore and Shanghai managing an AUM of US$150.12bn (September2020).

SMDAM is one of the largest investment management companies in Japan which provides asset management, advisory, investment trusts and other services to financial institutions, pension funds, government agencies and retail investors world wide.

SMAM Asia REIT Sub Trust Fund is managed by SMDAM.

Who will manage Kotak International REIT Fund of Funds?

Kotak International REIT Fund of Funds will be managed by Mr Arjun Khanna.

Mr Arjun Khanna is the dedicated fund manager for investments in foreign securities at Kotak AMC. He is a Bachelor of Engineering (Electronics) and has done his Masters of Management (Finance) from Jamnalal Bajaj Institute of Management Studies, Mumbai. He has received the Chartered Financial Analyst designation from the CFA Institute. He also holds FRM.

Mr Arjun Khanna has over 13 years of experience out of which 12 years has been with Mutual Funds in Equity Research. Prior to joining Kotak Mahindra Mutual Fund, he was with Principal Mutual Funds. He has also worked at Citibank N.A. in his earlier stint.

Mr Arjun Khanna manages Kotak Global Emerging Market Fund, Kotak Asset Allocator Fund, and Kotak Pioneer Fund. He is the dedicated fund manager for investments in foreign securities in various schemes at the AMC.

Fund outlook - Kotak International REIT Fund of Funds

Kotak International REIT Fund of Funds is a fund of fund whose performance will be in line with the underlying REIT scheme (SMAM ASIA REIT Sub Trust Fund). SMAM ASIA REIT Sub Trust Fund offers thematic investment in real estate across Asia Pacific Ex-Japan region.

As per the fund house, Asia Pacific Ex-Japan has highly organised real estate sector and strong growth potential. It has the potential to offer attractive dividend yield. On the back of strong economic growth in the region, the demand towards commercial facilities, office buildings and logistic properties have increased rapidly. Further rise of property prices in Asia Pacific region is expected, led by robust economic growth and rising rents. REIT market development in Asia Pacific region is expected to increase earnings opportunities and generate stable income from REITs.

It is noteworthy that Real Estate sector are vulnerable to economic growth or crisis of the country or the region. Hence once should understand the underlying risk like real estate related risk, regulatory risk, geo-political risk, currency risk, economic risk, and so on associated with the fund. Moreover, investors should consider their investment preference, risk appetite, and suitability before investing in Kotak International REIT Fund of Funds.

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Warm Regards,
Vivek Chaurasia
Editor, FundSelect

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