PGIM India Global Select Real Estate Securities Fund of Fund will invest 95-100 per cent of its corpus in its parent fund, PGIM Global Select Real Estate Securities Fund, which invests in real estate investment trusts (REITs) and equity related securities of real estate companies located throughout the world.
Currently, the parent fund has invested across 12 countries with major allocations in North America and Japan. These two countries account for about 75 per cent of the portfolio.
Globally, real estate as an asset class and as an investment has undergone a shift during the pandemic. It is believed that as the pandemic fear eases, and economies across the world reopen, properties such as hotels, assisted living facilities and restaurants will benefit from pent up demand. All these factors will be in favour of growth opportunities for real estate.
“As concerns around new variants of COVID ease, allowing workplaces and service-oriented industries to reopen more fully, occupier sentiment is expected to return quickly supporting a rebound in real estate space demand,” says Rick Romano, MD, PGIM Real Estate and Head of Global Real Estate Securities Business.
What Works In Its Favour
PGIM’s expertise brings comfort and confidence. Also, the parent fund has performed reasonably well since its launch (December 2015) with 7 per cent returns in dollar terms. The fund has comfortably beaten its benchmark FTSE EPRA NAREIT Developed Index with a decent margin in last the three and five years.
What Works Against
Concentrated exposure in a single market could prove to be risky if the real estate market in that country is affected adversely. For instance, the fund has exposure of little over 62 per cent in North America.
For Indian investors, the fund also carries currency risk. Since it is a fund of funds, debt taxation will apply to capital appreciation. Capital gains within three years will be added to your income and taxed as per your applicable tax slab; after three years, capital gains will be taxed at 20 per cent with indexation.
What Should You Do?
REITs offer diversification in your portfolio and lower correlation with equities makes it a case to have it in the portfolio. Savvy investors who want to diversify their portfolio in global real estate may like to consider investing in this fund.