WhiteOak Capital Mutual Fund is positioning its new Dividend Yield Fund to allocate 60-70% of its portfolio to REITs and InvITs, with dividend-paying equities providing growth potential. According to CIO Ramesh Mantri, the fund expects yield to be the primary driver of returns, with capital appreciation also playing a significant role. The fund's approach focuses on instruments that are required to distribute at least 90% of their net distributable cash flows to unitholders, providing contractual, rent- or toll-linked income rather than sentiment-driven returns. As per The Economic Times, the fund expects capital appreciation in REITs and InvITs to come from rental and toll escalations, occupancy gains, and the re-rating of these securities as the market deepens.
The total market capitalization of listed REITs and InvITs already exceeds ₹4 lakh crore, with more InvITs expected to list publicly over time. The fund can also invest in privately held InvITs, and the concentration issue should ease as more REITs and InvITs go public. The FY26-27 Union Budget announced plans for a PSU REIT listing, with most listed REITs and InvITs having significant plans to scale up their assets over time. Given the fund's size and the asset class being at an early stage in public markets, WhiteOak does not expect challenges in managing liquidity or capacity as assets grow over the next few years. The fund's significant allocation to equity arbitrage and cash equivalents will ensure liquidity for investors, with WhiteOak having invested close to ₹2,300 crore in REITs and InvITs across its funds.
WhiteOak defines a dividend-yielding company as one that has paid a dividend in any of the last three years, with the objective to maximize total returns rather than dividend yield itself. According to the fund's approach, a high dividend yield funded by debt or asset sales, or a rising payout ratio when free-cash-flow growth has stalled, is often a sign of a value trap. The fund avoids such investments by understanding the sustainability of underlying cash flows and steering clear of cyclical cash flows or high balance-sheet leverage. As reported by The Economic Times, REITs and InvITs are considered significantly superior to dividend equities in terms of both yield quantum and certainty, offering contractual, more predictable cash flows with limited operating leverage. The two play different roles in the portfolio: REITs and InvITs anchor it in terms of volatility, while dividend equities provide the growth potential.
The fund's strategy positions REITs and InvITs to anchor the portfolio in terms of volatility while dividend equities provide growth potential. As reported by The Economic Times, REITs and InvITs exhibit much lower volatility than equities, with the portfolio's overall volatility kept at a reasonably low level through capped exposure to dividend equities. The fund's definition of dividend-yielding companies focuses on sustainability of dividends and long-term growth potential alongside attractive valuation, with the objective to maximize total returns from the equity portfolio rather than dividend yield itself. The fund's significant allocation to equity arbitrage and cash equivalents will ensure liquidity for investors, with the fund's experience showing that occupancy and rental trends matter more than headline yield for REITs, while refinancing and distribution risk stays manageable when these vehicles carry long-dated, well-laddered debt and have financial flexibility built into their capital structure.
