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Real Estate Investment Trusts (REITs) are a popular and integral part of the Singapore Exchange (SGX). With close to 50 REITs, property-related business trusts and even REIT ETFs listed on the SGX, it’s not easy for a new investor to know what’s the best way to get started.
To help Singapore investors, particularly first-time REIT investors, Syfe, a digital wealth manager in Singapore (some call them a robo-advisory firm) have launched the REIT+, Singapore’s first risk-managed REIT portfolio. This portfolio allows investors to gain access to a REIT portfolio managed by Syfe via its Automated Risk-Managed Investments (ARI) strategy.
Before you think about whether to invest, let us first explain how this portfolio works.
How Is The Syfe REIT+ Portfolio Constructed?
Similar to most robo-advisory products, the portfolio mainly consists of two asset classes; Equity and fixed income.
The equity component of the portfolio consists of REITs. But rather than to invest in all the REITs listed on SGX, Syfe REIT+ chooses 15 high-quality REITs to invest in for the portfolio. The portfolio has exposure across various sectors such as industrial, retail, office, residential and others.
For the fixed income portion, Syfe uses the ABF Singapore Bond Index Fund. This allows it to gain diversification into an ETF, which invests in high-quality Singapore government bonds.
This also means that the portfolio is denominated in Singapore Dollar (SGD), which negates any currency risk for Singapore investors.
How Is The Portfolio Being Managed?
The portfolio is being managed by Syfe’s Automated Risk-managed Investment (ARI) strategy to give you higher risk-adjusted returns.
If you are new to investing, risk-adjusted returns may be hard to understand. Let us try our best to explain this in simple terms.
REITs investing can be volatile. In certain economic conditions, such as if there are tensions in the US-China trade war or the current Covid-19 virus outbreak, the economic outlook may be pessimistic and many stocks, including REITs, may suffer short-term price volatility.
What ARI does is that in these unfavorable conditions, the ARI will automatically reduce your risk exposure to the market by lowering the percentage of holdings in REITs within the Syfe REIT+ portfolio, and to hold a higher percentage in government bonds. When markets are favorable, the percentage of holdings in REITs will increase for the portfolio.
Essentially, the idea here is to take more risk via a higher percentage in REITs when markets are optimistic, and to reduce risk by lowering the holdings in REITs when markets are volatile.
The result, as you can see from the table above, is that the Syfe REIT+ portfolio enjoys lower volatility as compared to a conventional REIT portfolio.
This played out during the COVID-19, where Automated Risk-managed Investments (ARI) – Syfe’s proprietary data-driven engine – protected portfolios during the March 2020 market crash, after rebalancing. The portfolio was rebalanced on 2 March 2020 and 19 March 2020 which cushioned the impact of the market crash on Syfe REIT+, compared to the Singapore REIT20 Index
If you have more questions about how this works, we recommend that you speak to Syfe’s adviser, or attend one of their regularly held events.
Here are a few other notable features about the Syfe’s REIT+ portfolio that you ought to know.
# 1 Income Generating Portfolio
Similar to the reasons why many Singapore investors choose to invest in REITs, the main objective for the portfolio is to give investors a regular source of income via dividend payouts. Based on 2019 returns, the portfolio would have given you a dividend payout of about 4.6%. Total returns for the portfolio over the past ten years would have been 9.9%.
It’s important to note that while capital gain is possible for the portfolio, investors are likely to enjoy lower long-term capital gain as compared to investing in Syfe’s other equity-focused products such as Equity100. This is because the primary purpose of the REIT+ portfolio is income generation, as opposed to long-term capital gain.
# 2 Automatically Reinvest Your Dividends – If You Want
If you are looking to invest in the portfolio, dividend payouts will occur every quarter. However, you can also choose to automatically reinvest your dividends back into the portfolio if you prefer to let your returns compound.
# 3 You Can’t Customise Your Portfolio
Unlike its main global portfolio product, you are not able to customise the equity-fixed income composition for the portfolio. Instead, as mentioned above, this equity-fixed income composition is determined by the ARI strategy, which uses risk management strategies to reduce the overall risk for the REIT+ portfolio.
Everyone who is investing in this product will get the same returns.
Fees, Investment, Commitment For Syfe REIT+
Syfe charges between 0.4% to 0.65% per year, depending on your portfolio size. This all-inclusive management fee gives you free withdrawals and unlimited rebalancing. It is calculated daily and billed at the end of each month. Should you withdraw your balance before the end of the month, you pay only for the days your money was managed by Syfe.
There is no minimum investment amount nor a minimum commitment period. You can make a one-time deposit to fund your investment, or choose to make regular contributions of any amount you prefer, at a frequency of your preference. You can withdraw your funds at any point in time that you want.
While there is nothing to stop experienced REITs investors from investing in this portfolio, we believe this portfolio makes the most sense for an investor who wants to get started on REITs investing in Singapore, and who are reluctant to be stock pick.
Editor’s Note: Syfe also offers a REIT portfolio that allows you to allocate 100% of your investments into REITs. This means that Syfe’s ARI algorithm will not be deployed to provide risk management for the portfolio.
If you are interested to get started on investing with Syfe, DollarsAndSense has an exclusive partnership with Syfe – enjoy 0% management fee for the first $30,000 during the first 6 months after you sign up. Apply here to enjoy the promotion.