Low-risk assets beat out gold for returns

Low-risk assets beat out gold for returns

Property funds, real estate investment trusts (REITs) and infrastructure funds have yielded the best returns year-to-date amid market volatility.

Against the backdrop of a global economic slowdown and looser monetary policy adopted by most central banks, some investors have shifted their capital into bullion as a safe haven against rising uncertainty.

But gold has generated lower returns this year than low-risk assets such as property funds, REITs and infrastructure funds, Morningstar Research Thailand reported.

The top three returns for property funds are: LH Thai Property RMF with a 33.1% return year-to-date, followed by MFC Property Wealth Fund's 32.8% and One Property Plus Fund at 32.3%.

Returns generated from other property funds, REITs and infrastructure funds have reported more than 25% growth.

However, as Chinese equities have recovered over the past 2-3 months, some foreign investment funds investing in China A-shares have reaped huge investment returns. For instance, Krungsri's China A Share Equity A registered a 39.3% return, as of Sept 9.

Saharat Chusuwan, head of marketing, wealth advisory, mutual fund and private fund business at Tisco Asset Management, said investors have been moving money into low-risk assets that can generate recurring income and capital gains amid fears of a US economic recession and the likelihood of further interest rate cuts.

Gold has produced a return of 18-20% year-to-date, said Mr Saharat.

He said property funds, REITs and infrastructure funds have offered sustainable returns averaging 4-6% per year, but the capital gains from a price rally is very significant this year because of high demand for investment in this asset class.

The absolute return investors receive is made up of two segments: yields of the asset and capital gains, said Mr Saharat.

"This type of asset has become the most popular investment choice and will continue to be until global economic uncertainties die down," he said.

Mr Saharat said fixed income securities are another interesting asset class because investors can reap more profit from higher yields amid the downward outlook in interest rates.

A source from the mutual fund industry speaking on condition of anonymity said property mutual funds have less trading liquidity, but are active, with share prices continuing to rise.

"This is because property funds, REITs and infrastructure funds have been generating recurring income, so this kind of asset is appropriate for investment when economic sentiment is poor," said the source.

"Investors are likely to be satisfied with absolute returns plus capital gains.

"On the contrary, the investment return from gold is dependent on price, which is highly volatile because it is directly related to the outlook of interest rates and economic conditions."

Diversifying asset allocation into multiple asset classes will help investors balance risks and returns amid uncertainties dampening appetite for high-risk assets worldwide, said Chatchai Sarit-apirak, chief investment officer and deputy managing director at Kasikorn Asset Management.

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