PSE revives plan to list real estate investment funds

The Philippine Stock Exchange (PSE) is reviving a plan that will allow the listing of real estate investment funds in the bourse as part of ongoing efforts to develop and expand the financial products available to the investing public.

PSE president Francis Lim said over the weekend the exchange is reviewing its proposed rules on REITFs which it hopes to launch within the first quarter of next year.

Lim said the REITF facility will help inject liquidity in the property market.

REITs are companies that manage portfolios of property investments, earning money from rent and other fees – and paying out much of their annual income in the form of dividends to stockholders.

They seek to obtain a favorable long-term return through both capital appreciation and current income by investing primarily in the equity and fixed-income securities of companies involved in the real estate industry.

Real estate investment trusts are being offered in stock exchanges in Japan, Singapore and Australia.

Many studies have shown that investing in real estate provides investors with the potential for increased dividend income as well as the potential for reduced overall portfolio risk and higher returns.

For individual investors who want to put money into real estate, REITs offer perhaps the most accessible path without any of the expense and difficulty of buying properties directly.

REITs can invest in a wide variety of real property including shopping malls, office complexes, apartment buildings or hotels. They can also invest in mortgages on real estate properties.

For investment purposes, ownership of these properties is divided up into shares and traded on the stock exchange. REITs invest directly in these properties and pass the income and capital gains on to the shareholders.

The PSE is also studying the marketing and possible listing of more mutual funds. It earlier announced plans to list exchange traded funds to give investors more choices where to park their money.

ETFs are open-ended funds which track indexes or sectoral basket of securities that are listed and traded on a stock exchange. Investors may diversify their portfolios by investing in a single unit of ETF which conveys ownership in a group of securities representing specific industries or market sectors.

Because ETFs are exchange-traded, they are continually priced and can be traded intra-day. They enable investors to easily rebalance their portfolio at a low cost or to take advantage of a market trend. Similar to stocks, ETFs can be bought or sold in the board subject to modest management fees, regular stock transaction taxes and expenses.