Talking to ET Now, Amit Shah, CEO, IIFL Asset Management, discusses the strategy behind the EM Strategy Fund and REITs Fund.
First let us talk about these offerings which you are making now, the EM Strategy Fund and REITs Fund. How exactly is the EM Strategy Fund going to benefit the investors and what is the strategy at play in the background?
The EM Strategy Fund aims to give domestic investors in India chance to invest under liberalised remittance scheme and an option to look at investing in overseas markets. We all talk about diversification in a big way but if you look at most of the Indian investors' portfolio, it is concentrated towards Indian rupee and Indian asset classes. With the two new offerings, we believe domestic investors will get a good opportunity to avail of good quality stocks and benefit with long-term investments in those stocks.
Which emerging markets essentially would be in your universe and what kind of stocks would you go for - large-caps or diversified or midcaps?
We are not an emerging market expert asset manager. What we have done is we have selected an ETF listed in US which has 10 bps of total expense ratio and we intend to invest into that ETF, which is predominately investing into large-cap stocks in emerging markets.
Any indication what kind of return this particular product can generate?
One cannot comment on returns but I would just give a perspective that this portfolio would give investors a chance to invest into companies like Alibaba, Tencent, Baidu, ICBC etc. Essentially, what happens is you would be investing in the top quality companies available in most of the other emerging markets just as an investor invests in India. If one has to see long-term past track record, typically emerging markets as a basket have done reasonably well compared to India as a market.
Also, if you see the major components of this basket, they are good contrarian play to India because today if we believe that we are in an upward swing in commodities cycle, then economies like Brazil, Russia, China would not be one of the beneficiaries of that and there is quite a bit of allocation within this portfolio into these three economies.
Coming to the REITs Fund, this one would be looking for investing in Singapore office space. Singapore clearly is becoming a melting pot for talent across Asia. People are going there, companies are prospering very well. What kind of growth does this fund look at capturing for the investors?
This is not only investing in Singapore real estate. It is actually a global diversified REITs Fund. What we have done is identified sectors which we believe would benefit out out of the global growth which is healthcare senior living where we are investing into ETF in US which has senior living REITs. We are investing into Asian hospitality. We are investing into office spaces.
As you rightly pointed out there is lot of action happening in Singapore, Hong Kong and China where because of the economic growth, the office space requirement is growing reasonably well. All these REITs, typically if you look at it, come at a yield of between 5.5% and 7-8% but this should not be looked predominately as a fixed income instrument.
If you look at it, globally the 10-year G-Sec has already moved close to 3%. Our view is that interest rate should stabilise in this range plus/minus 25 bps and that is where we believe that this could be a good time for long-term investors to participate in global REIT products which gives them exposure to some of the interesting sectors like hospitality, senior living office space etc.