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Do more to attract investors to business trusts, say observers

Market watchers said that being a relatively new investment option, more needs to be done to attract local investors to business trusts.

SINGAPORE: Singapore is one of only two markets in Asia to accept business trust listings.

Business trusts’ performance has been mixed so far this year, on the back of wide variations in the underlying business sectors.

Market watchers said that being a relatively new investment option, more needs to be done to attract local investors to that asset class.

CitySpring Infrastructure Trust has seen its unit price gain more than 4 per cent since the start of this year.

But business trusts in the maritime industry are struggling, as they face an industry down-cycle.

However, when it comes to investing in business trusts, market watchers said dividend yield payouts are a key factor to consider.

Chua I-Min, consultant and lead instructor at AB Maximus, said: “If you want to invest in business trusts, you shouldn't be looking so much at capital gain -- that means your objective is more dividend yield. Prices do come down, but you actually still get your dividend yield.

“As of today, we're looking at some business trusts giving more than 10 per cent yield, of course at higher risk, but if you think that the risk is manageable, it's actually quite attractive at this point in time."

Still, observers said many investors are unfamiliar with the relatively new asset class, and more needs to be done to create greater awareness.

This includes more understanding about the underlying business of the trusts and having more options to pick from.

David Kuo, CEO of The Motley Fool, said: “At the moment, we haven't got a great deal of choice. But if we could have a lot more choice -- like energy -- included in business trusts, if we could have suspension bridges, toll roads, it would create a lot more variety for people so that a private investor could say 'I don't want shipping, I want toll roads’ -- and that would then increase the enthusiasm for private investors in business trusts."

Observers also warn that investors should be aware of the risks involved.

As business trusts generally hold large assets, investors need to manage their credit risk well, even in an environment of interest rate uncertainty. 

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