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

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.

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