Matrix is expecting double digit returns from its Asian Property Income fund on the back of a strong recovery in the Hong Kong and Singapore markets.
The fund offers hedged exposure in sterling to the returns of ARA Strategic Capital's Asian Asset Income fund, which invests in a range of real estate investment trusts (Reits).
These in turn are invested in retail, commercial, logistical and infrastructure assets in Japan (8%), Singapore (33%), Australia (14%), Hong Kong (26%) and other ASEAN countries (19%).
ARA Asian Asset Income fund manager Stephen Finch says Reits are entering into a healthy cycle of inorganic growth, where the low cost of issuing new equity and debt enables Reits to make high yield property acquisitions which in turn should help to re-rate their share prices.
"Based on the current sterling class share price and our expectations for income from Asian Reits, we are aiming to generate strong double digit yields over the course of 2010," Finch says.
"We believe Singapore looks to have reached the bottom of its commercial property cycle and expect a turnaround in the office sector. We also like logistics Reits which invest in warehouses and industrial space with good stable rental yields."
Finch says some of the larger Reits in the region have started to trade at premiums to NAV, but believes there is very good value to be found in smaller Reits, especially in the office sector, with some trading at discounts to NAV of up to 45%.
Reit yields are currently around 50-100bps wider than their historical norms, Finch adds, with a 50bps narrowing of yields translating into an 8% share price growth.
