Announcing the launch in a LinkedIn post, Edelweiss Mutual Fund MD and CEO Radhika Gupta said the fund is designed to provide investors with exposure to listed REITs and leading real estate companies through a single investment.
She added that as more REITs are listed in India, the underlying index is structured to increase its REIT allocation and could eventually become a fully REIT-based index.
The New Fund Offer (NFO) will open on August 5.
What is the fund?
According to the Scheme Information Document (SID) filed with SEBI, the fund is an open-ended index scheme that seeks to generate returns corresponding to the Nifty REITs & Realty Total Return Index, subject to tracking error.
The scheme will invest predominantly in securities that form part of the underlying index, with a small allocation to debt and money market instruments for liquidity and operational purposes.
As with other passive funds, the objective is to replicate the performance of the benchmark rather than outperform it through active stock selection.
Why isn’t it a pure REIT fund?
India currently has only a limited number of listed REITs. As a result, the underlying index combines REITs with listed real estate companies to provide broader diversification.
According to Gupta, the index has been designed so that as more REITs enter the market, the allocation to REITs can increase over time and has the potential to eventually become a 100% REIT index.
The benchmark also limits the weight of any single constituent to 15%, helping reduce concentration risk.
Why doesn’t it include InvITs?
Responding to questions on social media, Gupta said the fund does not combine REITs with Infrastructure Investment Trusts (InvITs) because the current SEBI framework for passive funds treats the two differently.
REITs are considered equity instruments, while InvITs have a hybrid character. Combining them would create a hybrid index fund, which is not permitted under the existing passive fund regulations.
How is it different from a real estate fund?
Traditional real estate mutual funds typically invest in shares of property developers and real estate companies. A REIT-oriented index fund, in contrast, provides exposure to listed REITs, which own and operate income-generating commercial real estate assets, while also holding real estate stocks because of the current composition of the benchmark index.
Who is the fund suitable for?
The SID states that the scheme is intended for investors seeking long-term capital appreciation through passive exposure to the REIT and real estate sectors. Like all equity-oriented mutual funds, returns are market-linked and there is no assurance that the investment objective will be achieved.
