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Kotak Mutual Fund launches India's first international REIT FoF

The first of its kind, the FOF will invest in listed REITs in the Asia- Pacific regions

Kotak Mutual Fund launches India's first international REIT FoF

Kotak Mahindra Mutual Fund has launched Kotak International REIT Fund of Funds, India's first diversified REIT mutual fund. This open-ended fund will invest in units of the SMAM Asia REIT Sub Trust Fund. The fund aims to have a diversified portfolio, with investments in various real-estate projects, including residential, office, data centres, warehousing, retail, etc. The New Fund Offer (NFO) opened up for subscription on December 7, 2020 and will close on December 21, 2020.

A real estate investment trust (REIT) is a company that owns or finances income-producing real estate projects across a range of property sectors, such as offices, hospitals, warehouses, hotels, etc. Like a mutual fund, a REIT pools capital from several investors and is publicly traded on a stock exchange.

Buying real estate is generally fraught with legal and operational challenges. Besides, it requires very large-scale investments. A REIT overcomes these hurdles for retail investors and paves the way for them to have fractional ownership of real estate with very low-ticket sizes.

The following are some insights into the underlying fund.

SMDAM Asia-Pacific REIT (ex. Japan) Strategy - The underlying fund
AUM:
US$1.1 billion
Number of REIT stock holdings: 31
Average dividend yield: 4.3%
Country allocation

Kotak Mutual Fund launches India's first international REIT FoF

Performance record: The graph below depicts the calendar-year performance (in US dollar terms) of the underlying fund, as per its October 2020 update. This would translate into a CAGR of around 8 per cent. However, an investor in India would have earned much more, given that the Indian rupee has depreciated against the US dollar at an average annual rate of around 5 per cent during this period.

Kotak Mutual Fund launches India's first international REIT FoF