On July 2nd, I have accidentally discovered one very outstation fund from the fund search tool available in Fundsupermart. Manulife Investment Asia-Pacific REIT Fund with an annual return of 26.02% stood out right in my eye as the top performing fund for that day. I immediately shared this finding with Platinum Group members and ask them to give attention to it. The latest performance, this fund still wins the top spot among all equity funds with a 1-year return of 24.06% as of July 13th from the same fund search result (see Table A).
Real Estate Investment Trust
The uniqueness of this fund is that it has withstood all the market roller coaster in the past. It seemingly defiles all gravity pull and moves on its own tandem (Chart A). The main reason is that this fund focuses on the REIT (Real Estate Investment Trust) sector of the stock markets. REITs are the kind of corporate that buy over large commercial or residential properties and aim to collect rental income to distribute to shareholders regularly. Those who invest in the REIT stock sector of the stock market would be similar to buying a piece of property and expect to collect steady income flow from rental.
Though REIT stock price is also influenced by the economic downturn like any property during the economic recession, the stock price daily fluctuation is relatively lesser as compared to ordinary business share prices. It is a sector that speculative activities are not that active. Investing into REIT will be similar to investing into Bond.
If you share with my view that the global recession is not coming any time soon in previous article, the key question now is, should we invest in Manulife Investment Asia-Pacific REIT Fund?
Analysis of the Fund
Looking at its 10 years performance, Manulife Investment Asia-Pacific REIT Fund has been performing steadily over the years. It looks like a healthy profiting fund especially compares to its benchmark performance (chart B). It has rewarded long term faithful investors of an annualized return rate of 14.04%. However, when we evaluate its 3 years’ performing chart, its chart looks a little bit too high to enter now. The big portion of fund price rises happened just in the recent 6 months.
The main reason for this fund price rises is contributed by Singapore property price rises since this fund invested 54% into Singapore REIT market (see Table B). Singapore property has risen very fast in just recent 6 months. So much so that some analysts worry that property market is probably peaked at this moment. Anyone who enters the Singapore REIT market could possibly late to the party and would face the risk of being trapped when the property market enters into a consolidated phase. However there are also views that the reverse trend is not likely.
Nevertheless, good thing about investing through a mutual fund is that the fund does not invest in Singapore REIT alone. Even if in case Singapore REIT made a U-turn, other REIT markets such as in Hong Kong, Australia, Malaysia and others would possibly mitigate its price drop. Secondly, the nearly 9% high of the cash holding of the fund house could possibly do some “magic” when it happens.
This fund is possibly a good fund that deserves our involvement in time like this when the equity market is directionless and the return is negligibly low. If you want to invest in this fund, make sure you prepare a strategy to handle in case if an undesirable event happens. Strategies such as top down, cut loss, or risk ratio spread between Manulife Investment Asia-Pacific REIT Fund and Manulife Investment Bond Plus Fund should be in place.
No one can be right all the time when it comes to market prediction. Even when analysts see the Singapore property market has gone too high recently, as the stock traders often say, whichever stock is high now can be even higher later. Finally, you may want to consider from another perspective to determine whether it is too risky to enter a fund where the prices are seemingly getting too high in Is It too High to Enter this Fund? which I wrote quite some time ago.
Anyway, investment journey is a learning journey, no gain is more happy than you learned new lesson even if you fail in certain investment as long as you derive good lessons out of it.
And therefore, the slogan saying “learn before you earn” is always a good motivation whenever we think about investment profit in the future.
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The view and opinion expressed are personal views of the author and are subject to change based on market and other conditions. This write up does not constitute sole advice for investment decision. Investors are advised to do further reading and research to conclude individual decision.