The significance and performance of Singapore REITs in a mixed-asset portfolio
| Date | 02 February 2015 |
| DOI | https://doi.org/10.1108/JPIF-12-2010-0027 |
| Published date | 02 February 2015 |
| Pages | 45-65 |
| Author | Graeme Newell,Anh Khoi Pham,Joseph Ooi |
| Subject Matter | Property management & built environment,Real estate & property,Property valuation & finance |
The significance and
performance of Singapore REITs
in a mixed-asset portfolio
Graeme Newell and Anh Khoi Pham
School of Business, University of Western Sydney, Sydney, Australia, and
Joseph Ooi
Department of Real Estate, National University of Singapore,
Singapore, Singapore
Abstract
Purpose –REITs have taken on increased significance in Asia in recent years, with Singapore REITs
(S-REITs) becoming an important property investment vehicle since 2002. The purpose of this paper
is to assess the significance, risk-adjusted performance and portfolio diversification benefits of
S-REITs in a mixed-asset portfolio context in Singapore over 2003-2013. The post-GFC recovery
of S-REITs is also assessed.
Design/methodology/approach –Using monthly total returns, the risk-adjusted performance
and portfolio diversification benefits of S-REITs over 2003-2013 is assessed, with efficient frontiers and
asset allocation diagrams used to assess the role of S-REITs in a mixed-asset portfolio. Sub-period
analyses are conducted to assess the post-GFC recovery of S-REITs.
Findings –S-REITs delivered strong risk-adjusted returns, being the best-performed asset class, but
with little portfolio diversification benefit over 2003-2013. Whilst taking on reduced risk, but with less
portfolio diversification benefits in recent years, S-REITs are seen to be robust relative to the other
major Singapore asset classes; contributing significantly across the risk spectrum; particularly in the
post-GFC period, where S-REITs have been the best-performed asset class in Singapore.
Practical implications –The results highlight the important strategic role of S-REITs in a Singapore
mixed-asset portfolio. The strong risk-adjusted performance has highlighted the robustness of S-REITs,
with S-REITs contributing to the mixed-asset portfolioacross the portfolio risk spectrum; particularly in the
post-GFC period. This robustness highlights the ongoing strategic role of S-REITs in a Singapore mixed-
asset portfolio, as well as the ongoing development of S-REITs as an important pan-Asia hub for REITs.
Originality/value –This paper is the first published empirical research analysis of the risk-adjusted
performance of S-REITs and the role of S-REITs in a portfolio. Given the increased significance of
REITs in Asia, this research enables empirically validated, more informed and practical property
investment decision-making regarding the role of S-REITs in a mixed-asset portfolio and S-REIT
performance in a post-GFC context.
Keywords Singapore, Robustness, Portfolio diversification, Post-GFC recovery,
Risk-adjusted returns, S-REITs
Paper type Research paper
Introduction
REITs in Asia have taken on increased significance in recent years, reflecting the
strong economic growth and improved market transparency in many of the Asian
property markets (APREA, 2014b; Chin et al., 2006; JLL, 2014a). Since being established
in 2001, this has seen major REIT markets established in Japan, Singapore, Hong Kong,
Taiwan and Malaysia; as well as South Korea and Thailand. Figure 1(a) highlights
the significant growth in these Asian REIT markets over 2001-2014.
This saw 100 REITs in Asia at March 2014, with a total market capitalisation of over
US$150 billion (APREA, 2014a), accounting for over 10 per cent of the global REIT
Journal of Property Investment &
Finance
Vol. 33 No. 1, 2015
pp. 45-65
©Emerald Group Publis hing Limited
1463-578X
DOI 10.1108/JPIF-12-2010-0027
Received 15 December 2010
Revised 29 July 2014
Accepted 29 July 2014
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1463-578X.htm
45
Performance
of Singapore
REITs
market capitalisation (EPRA, 2014). Within this Asian REIT context, Singapore
established a REIT market (S-REITs) in July 2002, with 29 S-REITs established by
March 2014. Given the significance of Singapore as a major financial centre in Asia and
as a major pan-Asia and international trade hub, as well as the increased focus by
international investors on the Asian property markets, it is important to assess the
significance and performance of S-REITs in a portfolio. This is further reinforced by
the traditional investor focus on listed property companies on the Singapore stock
market; and hence S-REITs providing another important source of listed property
exposure in Singapore for both local and international investors.
Most of the previous extensive REIT research has been done on the mature and
well-established REIT markets in the USA (e.g. Corgel et al., 1995; Feng et al., 2011;
Zietz et al., 2003) and Australia (e.g. Newell and Peng, 2009). With REITs in Asia only
being established in 2001, there is now an increasing body of knowledge concerning
Notes: (a) Asian REITs: 2001-2014; (b) S-REITs: 2002-2014
Source: APREA (2014a)
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Figure 1.
Growth in market
capitalisation for
Asian REITs:
2001-2014
46
JPIF
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