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Global Real Estate FoF provides a unique opportunity for Indian mutual fund investors

By Admin | 2021-11-21

As we start the new year, the trends that are keeping us excited here at PGIM India is the Real Estate story and the fact that we have been able to bring a product proposition for Indian investors which are unique and can provide access to a different asset class altogether within the mutual fund space.

When we think of the real estate investment opportunity, most of us are inclined to think in traditional terms of physical residential or commercial property. The option to participate in this asset class which retains the characteristics of the physical property but also brings forth the benefit of a mutual fund structure is an exciting one.

The effect of a global pandemic is now receding and economies around the world are recovering fast. Some sub-sectors within the real estate have seen a disruption due to Covid 19 and some of the shifts in behaviour may prove to be useful for demand in the long term. Any disruption historically - for example, for example, new technology- has been mostly about consumer choice for saving time.

Any new technology which provides convenience can shape human behaviour, has a greater chance of being a success. As an investor, it is imperative to recognize these disruptions and shift in consumer behaviour to lead us to investment choices that have the potential to generate above-average returns.

Real estate is also in a disruption of sorts. On one hand, we have the after-effects of the pandemic. On the other hand there are new opportunities,. At the heart of this disruption is the same underlying theme of change in behaviour, which leads me to believe that we are on the cusp of a new cycle in real estate.

A case in point is the shift in how companies are thinking of procuring materials and the supply chain may shift from just-in-time to just-in-case. This has long-term ramifications in terms of demand for space and storage, which may include specialized facilities as well. However, in the past, we have seen that to capitalize on any such disruptive opportunities, one needs to have that information edge, as initial innovation can be replicated fast and challengers may arrive on the scene.

I started off by saying that traditional ways of investing in physical real estate are changing and new innovations are emerging. Another traditional area that I think is seeing a rethink is the 60/40 portfolio mix of stocks and bonds for the long term. A global Real Estate FoF can help in diversifying further andadds another element for asset allocation strategies.

Apart from growth and income considerations, the modern-day portfolios need to be built taking into account higher inflationary expectations going forward and probably higher interest rates as well.

Real estate historically has been a beneficiary in such an environment.

To summarise, a Global Real Estate FoF provides a unique opportunity for Indian investors which is a combination of providing access in a hitherto asset class which was unaffordable for most and also provides diversification opportunities both in terms of the asset class as well as geographical and currency diversification. Just what a smart portfolio needs in today’s world.