Vol. 9 No. 2 (November 2015)

-By Rohaya Abdul Jalil, Hishamuddin Mohd Ali, Najib Razali and Janice Lee Mei Yim

Abstract

The aim of this paper is to investigate the impact of Real Estate Investment Trusts (REITs) on portfolio
diversification in Malaysia. REITs is known to bring about a stable and optimal return but less evidence on the
portfolio allocation of Malaysian REITs in maximizing investors benefit. Four year data is use comprising daily of
price quotes of thirteen REITs and twenty three common stock counter for comparison purposes. Through analysis
of expected return (ER) and standard deviation (SD) and the establishment of efficient frontier (EF), this paper
suggest that Malaysian REITs are able to contribute higher possible return in portfolio diversification as compared
to those asset portfolios without REITs participation by optimal allocation of REITs in portfolio between 41.54 to
49.44 percent. This paper also suggest during downturn economic situation higher allocation is advisable to be made
in REITs for maximizing investor return as its perfectly negatively correlated to general market. Yet, the uniqueness
of Malaysian REITs in term of its properties diversification strategies and size of fund made it difficult for the
investors to evaluate its potential.

Keywords: REITs, efficient frontier, risk, return, performance

01_OPTIMAL PORTFOLIO ALLOCATION OF MALAYSIAN REAL ESTATE INVESTMENT TRUSTS DURING ECONOMIC DOWNTURN

-By Aminah Mohsin, Mohammad Tahir Sabit Hj Mohammad

Abstract

It is often said that waqf is asset rich but cash poor. Hence, this paper aims to look at the effectiveness of saham
waqf in providing adequate funds for the development of waqf properties. The explanatory study is of the concept
of saham waqf and the practice of four waqf institutions in Malaysia. To determine risks to the effectiveness of the
concept and practice of saham waqf, both have to be studied qualitatively. On the concept, the contents of the
original fatwa and scholarly write-ups and literature were reviewed. To analyze the practice, available policy papers,
documented archives, and contents of semi- structured interviews with their officials were used. Considering the
nature of available data, performance of fund raising strategy (saham waqf) was measured by availability of
adequate funds at the time of completion of a development project or the number of similar projects it has financed
in a given period. It was found that in some cases of project-based fund raising exercises, saham waqf was unable to
have sufficient returns that could cover full cost of the development. The study concludes that project based saham
waqf may not be ideal fund raising strategy, and due to conceptual constrains, it might be an ad-hoc method as fund
is exhausted once it is utilized. The study also implies that generally saham waqf make waqf assets lose return
because of lack of value enhancement potential, which may have negative effect on overall capital adequacy of waqf
funds for socioeconomic projects. The study calls for improvement of conceptual model of saham waqf.

Keywords: Saham Waqf, effectiveness, funds, liquid fund

02_THE EFFECTIVENESS OF SAHAM WAQF ON ADEQUACY OF FUNDS FOR DEVELOPMENT PROJECTS IN MALAYSIA

-By Rohaya Abdul Jalil and Maizan Baba

Abstract

The establishment of Malaysian real estate investment trusts (M_REITs) through introduction of Malaysian REITs Guideline in 2005 has adopted the REITs practices in counterparts with few modifications that tailor to the local need. However, the aspect of M-REITs’ management advisory style has not been mentioned clearly. This study is appraising the M-REITs’ management advisory style by overview the United State (US) REITs experiences. A content analysis of previous literature on US REITs, Malaysian REITs Guidelines and M-REITs’ annual report was conducted to review the practices of M-REITs’ management advisory style. This study reveals that understanding of external and internal advisory management in Malaysia was different. Malaysian REITs appointed an external advisory manager company which was established by the REITs themselves. The REITs hold a significance amount of share in this external advisory managing company. The role to determine the new acquisition and plan for expansion remained in the REIT firm. This preliminary study is essential to stimulates further attention on M-REITs management advisory style since US literature suggest advisory influence firm value, debt financing and profit maximization.

Keyword: REITs, management advisory style, property portfolio, decision making