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Guide To REIT ETFs In Singapore

Best of both worlds.


As a Singaporean investor, we might have heard of Real Estate Investment Trusts (REITs) and Exchange Traded Funds (ETFs). Individually, these two investment products are popular among investors due to their respective strengths in providing relatively good yields or stable market returns. To meet investors’ interest, Singapore launched its first REIT ETFs on the Singapore Exchange (SGX) in 2016.

By combining ETF and REITs, a REIT ETF can provide an opportunity for investors to enjoy both benefits of having a good dividend yield along with diversified returns.

Read Also: How Much Would Singapore Investors Have Made If They Invested $1,000 In Every REIT ETF Since Their Listing?

Things To Note Before Investing In REIT ETFs

In general, a REIT ETF would track an existing REIT index and seek to replicate the returns of the index. Here are some things to know before you start investing with a REIT ETF.

#1 Benefit – Lower Investment Quantum For Diversified Strategy

Singapore has a total of 42 REITs which accounts for 12% of Singapore’s Stock Exchange (SGX) market capitalisation. Over the past decade, the REITs market has grown at an annual compounded rate of 11%. Regardless of the relatively good dividend yield, the performances of REITs are not uniformed. Depending on REITs we picked, the returns can vary. For example, picking First REIT (SGX: AW9U) or ParkwayLife Reit (SGX: C2PU) generates different returns even though they are both healthcare REITs.

If we were to invest in both healthcare REITs, we would have to fork out enough capital to buy two units worth of REITs. However, investing in a REIT ETF can allow investors to enjoy the same diversification without having to pay for multiple units to accumulate the same portfolio.

Read Also: Complete Guide To ETF investing in Singapore

#2 Benefit – Passive Investment

Apart from providing a diversified strategy, investing with an ETF allows investors to invest passively. Instead of having to check on each REITs performance, the ETF would track a specific REIT benchmark and select the REITs according to the fund’s strategy. This review of REITs in an ETF is usually done quarterly.

#3 Downside – Paying “Twice” For Management Fees

While our transactional fee is lower since we do not need to purchase multiple REITs to accumulate a portfolio, the management fee we are paying is higher. This is because you have to pay the ETF’s management fees on top of the individual REIT’s management fees.

#4 Downside – Lower Returns Than Benchmark

Since we are investing in an ETF, the downsides of a REIT ETF are similar to a regular ETF. Since we have to pay for management fees, our returns will be close to but lower than the index.

As always, there are benefits and risks in investing in any product. Regardless, REIT ETF provides investors an opportunity to still participate in REIT investing if they are not confident in picking the “winning” REIT.

Currently, Singapore has three REIT ETFs. They are NikkoAM-StraitsTrading Asia Ex Japan REIT ETF, Lion-Phillip S-REIT ETF and Phillip SGX APAC Dividend Leaders REIT ETF.

Read Also: 5 Things You Need To Know About Investing In REITs

NikkoAM-StraitsTrading Asia Ex Japan REIT ETF (SGX: CFA)

Listed in 2017, NikkoAM-StraitsTrading Asia Ex Japan REIT ETF (SGX: CFA) was launched by Nikko Asset Management and Straits Trading Company. Available in both SGD (SGX: CFA) and USD (SGX: COI), the fund asset under management (AUM) is at $364.16 million, making it the largest REIT ETF on SGX.

The benchmark tracked by the fund is FTSE EPRA Nareit Asia ex Japan REITs 10% Capped Index. This international benchmark allows investors to enjoy overseas exposure in countries such as Hong Kong, Malaysia and India.

Based on the recent June 2021 review, the top five REIT holdings are Link REIT (Hong Kong) at 10.0%, Ascendas REIT at 9.9%, Capitaland Integrated Commercial Trust at 9.7%, Mapletree Logistics Trust at 7.8% and Mapletree Industrial Trust at 6.9%. In terms of sectors, the fund is holding about 68% retail and industrial REITs.

Investors who have bought into this REIT ETF since its launch would have enjoyed an annualised return (inclusive of dividends) of 7.23%.

The management fees are at 0.6% per annum with a 12-month trailing dividend yield of 4.17%.

Read Also: How Much Would Singapore Investors Have Made If They Invested $1,000 In Every REIT ETF Since Their Listing?

Lion-Phillip S-REIT ETF (SGX: CLR)

Also launched in 2017, Lion-Phillip S-REIT ETF (SGX: CLR) is managed by Lion Global Investors and Phillip Capital Management. Lion Global Investors is owned by OCBC. The fund currently has an AUM of $ 224.1 million and is the second-largest ETF on SGX.

Tracking the Morningstar® Singapore REIT Yield Focus Index, the fund is a 100% Singapore focused REIT ETF. According to the recent June 2021 review, the top 5 REIT holdings are Mapletree Industrial Trust at 10%, Mapletree Commercial Trust at 10%, Mapletree Logistics Trust at 10%, and Frasers Centrepoint Trust at 9.7%. The fund holds about 64.1% of industrial and retail REITs.

Since its inception, investors would have enjoyed an annualised return (inclusive of dividends) of 6.8%.

With a 12-month trailing dividend yield of 4.32%, the management fees are at 0.6% per annum

Read Also: Why A REITS ETF Would Be Great For The Singapore Exchange

Phillip SGX APAC Dividend Leaders REIT ETF (SGX: OVQ)

First to be listed on SGX, Philip SGX APAC Dividend Leaders REIT ETF (SGX: OVQ) was launched in 2016 by Phillip Capital Management. Currently, the ETF size is at $23.97 million AUM and we can invest in both SGD (SGX: OVQ) or USD (SGX:BYI).

The index tracks the performance of the top 30 highest yield REITs on the benchmark iEdge APAC Ex-Japan Dividend Leaders REIT Index. Based on June 2021 report, the top five holdings are mainly in Hong Kong and Australia. They are Link REIT at 9.69%, Mirvac Group at 8.46%, Dexus at 7.99%, Goodman Group at 7.93%, and Stockland at 7.29%.

The dividends are paid out in USD hence returns can be affected by currency movements. For investors who have invested in SGD, the annualised returns since inception would be at 5.69% (inclusive of dividends). Those who have invested in USD would get a higher return of 6.37%.

The management fees for the ETF are the lowest among the three REIT ETFs at 0.3% per annum. However, its 12-month trailing dividend yield is only at 2.14% which is relatively lower than the rest.

Read Also: 4 ETFs On SGX For Exposure To Different Markets: Nikko AM STI ETF (G3B); Nikko AM REITs ETF (CFA/COI); Lion-OCBC Hang Seng Tech Index ETF (HST/HSS); SPDR Gold Shares (O87)

Choose REIT ETFs For A Diversified Strategy

Marrying the benefit of having relatively good yield, stable returns and broad diversification is the value REIT ETFs brings to investors. Additionally, NikkoAM-StraitsTrading Asia Ex Japan REIT ETF and Phillip SGX APAC Dividend Leaders REIT ETF also provides investors overseas diversification exposure.

For those of us who want the diversification but wish to own the underlying REITs units, products such as Syfe REIT+ which tracks the iEdge S-REIT Leader Index is also worth looking into for REITs investment.

Read Also: REITs ETFs VS Unit Trusts VS Syfe REIT+: Which REITs Investing Method Should Beginners Choose?

 

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