GLOBAL: San Francisco-based IdealRatings today launches the world’s first Shariah compliant Asia Pacific real estate investment trusts (REITs) index, IFN can exclusively announce. Known as the IdealRatings Asia Pacific REITs Index, the index will cover REITs in the Asia Pacific region, with the view of expanding coverage to include the entire global REITs universe in the future.
REITs have in recent years gained increasing favor among Shariah-seeking investors as the community attempts to diversify away from traditional investments such as oil and gas, while securing steady dividend-paying investments – criteria of which are met by REITs. Mohamed Donia, CEO of IdealRatings, confirms the potential for Shariah compliant REITs. “We are always looking to increase various asset classes for investment managers and we foresee a major growth in this asset class as fund managers begin to include the REITs sector in their portfolio.”
The Asia Pacific region has been highlighted by IdealRatings as a particularly appealing market as the region’s property and real estate sector continues to be a solid receiver of Shariah funds. The creation of a comprehensive Shariah REITs index which will enable fund managers to benchmark the performance of relevant funds and track the performance of the sector, is therefore a welcomed move by the industry as a step forward in the development of the Islamic finance market. CEO of independent asset manager B&I Capital, Charles Issac, agrees: “The Shariah compliant REIT sector is still in its infancy with a very promising future so index initiatives like this will encourage further asset allocation and broadening of the investment universe.” Isaac confirms that his firm will be using the new index as a benchmark to compare performance of the segment.
Calculated in US dollars with REITs from various jurisdictions including Australia, Japan and Singapore, the market cap-weighted, free-float index will be re-balanced every three months with Shariah screening to be performed on a quarterly basis as well. Apart from complying with IdealRatings’ methodology for REITs, real estate operation and properties business classification activities, the REIT must also derive half of its income from the Asia Pacific region to be included in the index.