A PERFORMANCE AND PORTFOLIO OUTLOOK OF SHARIAH REIT: AN INTERIM REVIEW

Abstract

Islamic REIT is a relatively new financial instrument thus limited studies have been done on it. This thesis will be a performance review and portfolio outlook of 3 Islamic REITs which were developed in Malaysia over the period of September 2006 to December 2009. It is shown in the thesis that Islamic REITs managed to outperform selected Islamic Real Estate stocks and benchmarks like KLSE properties and FTSE Bursa Malaysia. It also did relatively well when compared to other conventional REITs in Malaysia thus further supporting the hypothesis that Shariah compliance does not necessarily affect the performance of a financial instrument. The Islamic REITs have also recorded superior performance over REITs in matured Asia REIT markets (Japan and Singapore), Australia and the US. The study found that Islamic REIT with a low correlation to other assets are useful in diversifying multi-asset portfolio by helping to maximize portfolio return and minimize portfolio risk. It is also shown that Islamic REIT is just as useful in helping to diversify and help improve performance of both local and Asian security portfolio. Finally, the study found out that it is a good strategy to hold a portfolio of Islamic REIT as it can outperform single asset portfolio of individual Islamic REIT.