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The significance and performance of Singapore REITs in a mixed-asset portfolio

Graeme Newell (School of Business, University of Western Sydney, Sydney, Australia.)
Anh Khoi Pham (School of Business, University of Western Sydney, Sydney, Australia.)
Joseph Ooi (Department of Real Estate, National University of Singapore, Singapore.)

Journal of Property Investment & Finance

ISSN: 1463-578X

Article publication date: 2 February 2015

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 portfolio across 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

Citation

Newell, G., Pham, A.K. and Ooi, J. (2015), "The significance and performance of Singapore REITs in a mixed-asset portfolio", Journal of Property Investment & Finance, Vol. 33 No. 1, pp. 45-65. https://doi.org/10.1108/JPIF-12-2010-0027

Publisher

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Emerald Group Publishing Limited

Copyright © 2015, Emerald Group Publishing Limited