The Securities & Futures Commission has proposed to allow investments in listed real estate trusts by collective investment schemes authorised under the Code on Unit Trusts & Mutual Funds. Views on the proposal can be sent to the commission by March 24.

The commission has conducted a review of the provisions in the Code on Unit Trusts & Mutual Funds regarding real estate to provide SFC-authorised schemes with more flexibility in investing in listed REITs.

A consultation paper, published today, sets out the basis for the review and proposes the parameters for regulating investments in listed REITs by SFC-authorised schemes.

The key proposals are:

* SFC-authorised funds may invest in any REIT listed on a stock exchange;

* the investment limits applicable to each listed REIT should be equivalent to those applicable to securities in which SFC-authorised schemes are currently allowed to invest, that are: (a) the value of a scheme's holding of a listed REIT may not exceed 10% of its total net asset value; and, (b) a scheme may not hold more than 10% of any shares or units issued by any listed REIT.

Broader investment choice

The commission's Executive Director of Intermediaries & Investment Products Alexa Lam said the inclusion of listed REITs for investments by SFC-authorised schemes will broaden investment choices for such funds. This is in line with the international trend towards recognition of REITs as a separate asset class.

"The proposals aim to be pragmatic and easy to monitor, while at the same time ensuring sufficient investor protection," she said.

The one-month consultation will end on March 24. People may send their views to the commission by emailing pconsult@sfc.hk; faxing 2877 0318; or mailing Investment Products Department, Securities & Futures Commission, 8/F Chater House, Central.

Following the consultation, the commission will prepare a document summarising the views and set out the revision to the relevant provisions in the code.