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The Alter-NATIVE series How REITs can benefit AIFs?

How REITs can benefit AIFs?

REITs offer the benefits of transparency, liquidity and smooth operations.
Edelweiss Feature Sep 19, 2017

Alternative investments represent asset classes of just about anything outside the realm of traditional stocks, bonds or cash. Many investment options fall into this category including real estate, commodities, hedge funds, private debt and private equity. As the information asymmetry in the markets lessens and they become more efficient, investors look for assets that are less correlated with the variations experienced with daily market pricing.

While real estate has always been a great investment option for investors that are looking for uncorrelated returns, the asset class also suffers from various issues. Chief among them is lack of liquidity and transparency. Real Estate Investment Trusts or REITs as they are popularly known, address these issues and offer investors an alternative avenue for investing. The development of REITs and its positive impact on investor portfolio has contributed to its global popularity. These instruments offer the benefits of transparency, liquidity and smooth operations.

As per the Securities Exchange Board of India (SEBI), REITs are now available in India and need to be registered via an IPO or initial public offering. The SEBI board has kept the minimum asset sizes to be invested in at Rs 500 crore. However, the minimum issue size would have to be less than Rs 250 crore.

This is a positive development for Alternative Investment Funds as they now have the option to either invest in relatively illiquid real estate or through listed REITs. Such developments only serve to widen the scope of investable assets for AIFs and thus their ability to generate higher returns.

Past performance is not an indication of future performance. Investments in the securities market are subject to market risk.

Please read the Private Placement Memorandum carefully before investing.

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