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 Property Funds
General Information on Property Funds
Property funds, unlike any other mutual funds, have the objective of mobilizing the funds from general investors by issuing the unit trust and then investing the fund in real estate, residential projects or other property-linked securities allowed by law. The property funds focus on investment in property that returns a regular income rather than buying and developing property for future sale or trade.
Under the Securities and Exchange Commission regulations, the property funds in Thailand must be closed-end funds with a minimum capital of 500 million Baht. The property funds are classified into 2 types 1) "specific" property funds, which have clearly specified the property or properties to be purchased or leased in the prospectus and 2) "nonspecific" property funds which only describe the type of property to be acquired in the future. Nevertheless, both fund types are required to invest at least 75% of their net asset value (NAV) in real estate, or the leasehold rights of real estate, which must be located in Thailand and be at least 80% constructed. Furthermore, after property acquisition, the property funds must hold the property for a minimum of one year. The regulations concerning property funds do not, however, allow investing in dormant land.
In terms of the unit trust holders' portion, property funds are required by the regulations controlling them to pay dividends at a minimum of 90% of the annual net profit to the unit holders.
Trading of Unit Trust of Property Funds
Even though the property funds are categorized as mutual funds, their business nature and income stream are similar to regular company. What's more, the international markets treat the trading of property funds and real estate investment trusts (REITs) as regular equity. The Stock Exchange of Thailand has deemed it appropriate to treat the trading practices having to do with the unit trust of property funds the same as regular equity. As a result, the trading regulations concerned with investment units of property funds will be as follows:
Trading Board: Main board,
Foreign board (only the fund that have foreign shareholder limitation),
Odd lot Board and Big lot board
Price Regulations
- Spread : Minimum price movements, as determined by the SET for securities trading, vary according to each market price level.
- Daily price limit :Maximum daily price change must be with in ?30 percent of the previous closing price
Industrial classification
Initially, The Stock Exchange of Thailand has categorized the investment units of property funds into the Property Development Sector in order to conform to their source of future cash flow. As the number of property fund has grown up, in 2009, the SET has established a particular sector, “Property Fund Sector(PFUND), Property & Construction Industry Group", effective March 31, 2009.
Market Capitalization and SET Index Calculation
The SET will include the market value of the unit trusts of the property funds in the SET Market capitalization while the price movement will be reflected in the indices. The rationale for the above stated inclusions is that the investment units of property funds are more comparable to an equity instrument than regular mutual funds listed on the SET. Furthermore, the SET views property funds as stated above because at least 75% of the net asset value of a property fund must be invested in real estate which possesses its own real economic value. This is unlike mutual funds which invest primarily capital into listed shares and financial instruments. Thus the inclusion of property funds market value in the SET's market capitalization will not duplicate any existing capitalization.
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