Choosing the Best REIT ETFs in Singapore for Your Portfolio
In the bustling financial ecosystem of Singapore, Real Estate Investment Trusts (REITs) shine as a beacon for investors seeking stable dividends and exposure to diverse real estate assets. As a financial hub, Singapore offers a plethora of investment opportunities, with REITs standing out for their liquidity and accessibility compared to traditional real estate investments.
For those new to this realm or looking for a hands-off investment approach, REIT Exchange-Traded Funds (REIT ETFs) provide an attractive solution. These funds amalgamate various REITs into a single tradeable asset, simplifying exposure to the sector and reducing investment risk through diversification. With FIVE REIT ETFs currently listed on the Singapore Exchange, reflecting a growing interest and a significant asset under management (AUM) increase, Singapore REIT ETFs are paving the way for investors to tap into the real estate market's potential efficiently and effectively.
Understanding Singapore REIT ETFs
The allure of the Singapore real estate market lies not just in its modern skyline and strategic location but also in its stability and growth potential. Within this dynamic market, Singapore Real Estate Investment Trusts (S-REITs) offer a unique investment proposition. S-REITs are publicly listed companies that pool capital from investors to purchase and manage a portfolio of real estate properties, ranging from office buildings and industrial spaces to commercial properties. This broad spectrum allows investors to gain exposure to various segments of the real estate market through a single investment.
As of now, the Singapore Exchange (SGX) hosts 42 REITs, presenting investors with a plethora of options to choose from. However, the abundance of choices also brings the challenge of selection and management, which is where Real Estate Investment Trust Exchange-Traded Funds (REIT ETFs) come into play. REIT ETFs are designed to track indices composed of REITs, providing investors with a diversified portfolio of real estate investments through a single transaction. This not only simplifies the investment process but also offers the benefits of diversification, reducing the risk associated with individual REIT investments.
Stability of the Singapore Real Estate Market
The Singapore real estate market is known for its resilience and stability, underpinned by a strong regulatory framework and a robust economy. This stability makes S-REITs and consequently, REIT ETFs, attractive investment vehicles for those looking to invest in real estate without the volatility often associated with other markets.
Tax Advantages for Investors
S-REITs enjoy favorable tax treatments, such as tax transparency, where the income is taxed at the unitholder level and not at the trust level, provided certain conditions are met. This can result in higher distributable income for investors and is a compelling reason for considering S-REITs and REIT ETFs in investment portfolios.
Diversification Benefits
One of the key advantages of investing in REIT ETFs is the diversification they offer. Instead of putting all eggs in one basket by investing in a single property or REIT, investors can spread their risk across a variety of properties and sectors. This diversification can lead to more stable returns and reduced risk.
Definition of REIT ETFs
REIT ETFs are exchange-traded funds that invest in a diversified portfolio of REITs. By tracking REIT indices, these ETFs allow investors to gain broad exposure to the real estate sector with the added benefits of liquidity and transparency offered by being listed on stock exchanges.
History and Growth of REIT ETFs in Singapore
The Singapore REIT market has seen significant growth over the years, with the introduction of REIT ETFs adding a new dimension to real estate investing in the region. These ETFs have grown in popularity, attracting both local and international investors looking for exposure to Singapore's real estate market without the need for direct property management.H3 - The FIVE REIT ETFs
Here are the FIVE Singapore REIT ETFs available on the SGX for investor consideration:
| REIT ETF | Underlying Index |
|---|---|
| NikkoAM-StraitsTrading Asia Ex Japan REIT ETF | FTSE EPRA Nareit Asia ex Japan Net Total Return REIT Index |
| Lion-Phillip S-Reit ETF | Morningstar® Singapore REIT Yield Focus IndexSM |
| CSOP iEdge S-Reit Leaders ETF | iEdge S-REIT Leaders Index |
| UOB Asia Pacific Green REIT ETF | iEdge-UOB APAC Yield Focus Green REIT Index |
| Phillip SGX APAC Dividend Leaders REIT ETF | iEdge APAC ex Japan Dividend Leaders REIT Index |
What to Consider When Buying Singapore REIT ETFs?
Investing in Singapore REIT ETFs requires a multifaceted approach to ensure alignment with your investment goals and risk tolerance. Below are key factors to consider:
ETF Components and Sector Exposure
Understanding the composition and sector exposure of a REIT ETF is critical. Different ETFs may focus on various sectors such as commercial, industrial, healthcare, and retail properties. The concentration in a particular sector can significantly influence the ETF's performance depending on market conditions.
Expense Ratio and AUM
A lower expense ratio is generally better as it means you're paying less in management fees, potentially increasing your returns. AUM reflects the size of the ETF and can indicate liquidity and investor confidence. Larger AUM may lead to more stability and easier entry or exit points for investors.
Distribution Yield and Frequency
These factors affect how much income you can expect and how often. A higher yield is attractive but consider the total return potential and stability of income. Frequent distributions may be preferable for income-focused investors.
Return Since Inception and Tracking Error
The return since inception gives an idea of how the ETF has performed over time, while the tracking error indicates how closely it follows its benchmark. A lower tracking error suggests that the ETF effectively replicates the performance of the index it tracks and it shouldnt exceed 2%.
Geographical Exposure
ETFs focusing exclusively on Singapore REITs include Lion-Phillip S-REIT ETF and CSOP iEdge S-REIT Leaders ETF. Both offer investors exposure to the stable and well-regulated Singapore real estate market.
ETFs like NikkoAM-StraitsTrading and Phillip SGX APAC Dividend Leaders offer broader exposure across Asia excluding Japan, potentially tapping into faster-growing markets but also introducing regional risks
The UOB Asia Pacific Green REIT ETF provides a unique blend, focusing on environmentally better-performing REITs across the Asia Pacific region, including diverse economies and real estate markets.
Summary of Singapore REIT ETFs
| REIT ETF | Expense Ratio | AUM (S$ million) | Dividend Yield | Distribution Frequency | Geographical Exposure |
|---|---|---|---|---|---|
| Lion-Phillip S-REIT ETF | 0.60% | 314 | 6.06% | Semi-Annual | Singapore |
| NikkoAM-StraitsTrading Asia Ex Japan REIT ETF | 0.55% | 379 | 6.61% | Quarterly | Asia Ex Japan |
| CSOP iEdge S-REIT Leaders ETF | 0.60% | 70 | 7.61% | Semi-Annual | Singapore |
| Phillip SGX APAC Dividend Leaders REIT ETF | 0.65% | 12 | 4.60% | Semi-Annual | Asia Ex Japan |
| UOB Asia Pacific Green REIT ETF | Up to 0.80% | 61 | 4.38% | Semi-Annual | Asia Pacific |
* data as of Apr 2024
Let’s Look into the Details of These Singapore REIT ETFs
Lion-Phillip S-REIT ETF
| Detail | |
|---|---|
| Stock Code | CDR |
| Underlying Index | Morningstar® Singapore REIT Yield Focus Index |
| Dividend Yield (as of Jan 24) | 5.6% |
| Expense Ratio (p.a.) | 0.6% |
| Performance (2023) | 0.56% |
| Tracking Error | 0.5% |
| Fund Size (AUM) | SGD 353.2M (as of Apr 24) |
| Dividend Frequency | Semi-annually |
| Inception Date | 30 October 2017 |
| Lot Size | 100 Units / lot |
| No. of Holdings | 22 |
| Top 5 Holdings | CapitaLand Ascendas REIT, Frasers Logistics & Industrial Trust, Mapletree Logistics Trust, CapitaLand Integrated Commercial Trust, Keppel DC REIT |
| Geography Coverage | 100% Singapore |
| REIT Industry Allocation | Industrial: 36.51%; Retail: 31.06%; Specialized: 8.84%; Diversified: 7.85%; Health Care: 6.16%; Office: 4.68%; Hotel & Resort: 3.49% |
NikkoAM-StraitsTrading Asia Ex-Japan REIT ETF
| Detail | |
|---|---|
| Stock Code | CodeCFA (SG$), COI (US$) |
| Underlying Index | FTSE EPRA Nareit Asia ex Japan REITs 10% Capped Index |
| Dividend Yield (as of Jan 24) | 5.71% |
| Expense Ratio (p.a.) | 0.55% |
| Performance (2023) | -6.59% |
| Tracking Error | 0.24% (3 yr annualised) |
| Fund Size (AUM) | SGD 363.42M (as of Apr 24) |
| Dividend Frequency | Quarterly |
| Inception Date | 29 March 2017 |
| Lot Size | 10 Units / lot |
| No. of Holdings | 41 |
| Top 5 Holdings | CapitaLand Ascendas REIT, Link REIT, CapitaLand Integrated Commercial Trust, Mapletree Logistics Trust, Mapletree Industrial Trust |
| Geography Coverage | Singapore: 73.6%; Hong Kong: 13.5%; India: 6.8%; South Korea: 2.7%; Malaysia: 1%; Philippines: 0.7%; Others: 0.7% |
| REIT Industry Allocation | Retail: 37.5%; Industrial: 32.3%; Office: 12%; Diversified: 7.9%; Hotel & Resort: 4.9%; Data Center: 4%; Others: 2.2% |
Phillip SGX APAC Dividend Leaders REIT ETF
| Detail | |
|---|---|
| Stock Code | CodeBYI (US$), BYJ (SG$) |
| Underlying Index | iEdge APAC Ex-Japan Dividend Leaders |
| Dividend Yield (as of Jan 24) | 4.13% |
| Expense Ratio (p.a.) | 1.13% |
| Performance (2023) | -0.85% |
| Tracking Error | 1.87% (1 yr rolling) |
| Fund Size (AUM) | SGD 12.25M (as of Apr 24) |
| Dividend Frequency | Semi-annually |
| Inception Date | 20 Oct 2016 |
| Lot Size | 100 Units / lot |
| No. of Holdings | 30 |
| Top 5 Holdings | Link REIT, Scentre Group, CapitaLand Integrated Commercial Trust, Stockland, Dexus |
| Geography Coverage | Australia: 52.51%; Hong Kong: 11.48%; Singapore: 34.8% |
| REIT Industry Allocation | Diversified: 30.94%; Retail: 39.58%; Industrial: 12.9%; Office: 11.43%; Others: 3.96% |
CSOP iEdge S-REIT Leaders Index ETF
| Detail | |
|---|---|
| Stock Code | SRT (SG$), SRU (US$) |
| Underlying Index | CSOP iEdge S-REIT Leaders Index |
| Dividend Yield (as of Jan 24) | 4.94% |
| Expense Ratio (p.a.) | 0.6% |
| Performance (2023) | -0.71% |
| Tracking Error | 0.28% (1 yr rolling) |
| Fund Size (AUM) | USD 51.04M (as of Apr 24) |
| Dividend Frequency | Semi-annually |
| Inception Date | 18 Nov 2021 |
| Lot Size | 10 Units / lot |
| No. of Holdings | 21 |
| Top 5 Holdings | CapitaLand Ascendas REIT, CapitaLand Integrated Commercial Trust, Mapletree Logistics Trust, Mapletree Industrial Trust, Mapletree Commercial Trust |
| Geography Coverage | Singapore: 64%; Australia: 9%; United States: 5%; China: 4%; Hong Kong: 4%; Japan: 3%; Others: 9% |
| REIT Industry Allocation | Industrial: 42.5%; Office: 19.7%; Retail: 18.4%; Data Centre: 7.5%; Multi Asset: 6.9%; Health Care: 2%; Residential: 1.9%; Hotel: 1.2% |
UOB Asia Pacific Green REIT ETF
| Detail | |
|---|---|
| Stock Code | GRN (SG$), GRE (US$) |
| Underlying Index | iEdge-UOB APAC Yield Focus Green REIT Index |
| Dividend Yield (as of Jan 24) | 4.21% |
| Expense Ratio (p.a.) | 0.8% |
| Performance (2023) | -0.51% |
| Tracking Error | 0.52% (1 yr rolling) |
| Fund Size (AUM) | SGD 83.4M (as of Apr 24) |
| Dividend Frequency | Semi-annually |
| Inception Date | 23 Nov 2021 |
| Lot Size | 10 Units / lot |
| No. of Holdings | 52 |
| Top 5 Holdings | Scentre Group, Stockland Corp Ltd, CapitaLand Integrated Commercial Trust, Vicinity Centres, Link Real Estate Investment Trust |
| Geography Coverage | Australia: 39.8%; Japan: 31.61%; Singapore: 22.71%; Hong Kong: 5.45% |
Navigating Singapore REIT ETFs Risks and Challenges
Singapore REIT ETFs, like all real estate investments, are sensitive to interest rate changes. Higher interest rates can increase borrowing costs for REITs, potentially reducing their profitability and distributable income. Additionally, during economic downturns, property values and occupancy rates may decline, affecting the performance of REITs and, consequently, REIT ETFs. Investors should be aware of these macroeconomic factors and their potential impact on investments.
The regulatory environment in Singapore is well-established, but changes can occur. Amendments in tax laws, REIT structure regulations, or international trade policies can affect REIT operations and profitability. Staying informed about regulatory changes and understanding their implications is crucial for investors in Singapore REIT ETFs.
With the popularity of REIT ETFs growing, it's important for investors to have realistic expectations about returns. While REIT ETFs offer the potential for steady income through dividends, investors should be wary of market hype and conduct thorough research to understand the factors that drive returns and the potential risks involved.
Strategic Investment Approaches
Investing in Singapore REIT ETFs can suit both long-term and short-term investment strategies, depending on the investor's goals and risk tolerance. Long-term investors may benefit from the compounding effect of reinvested dividends and potential capital appreciation. In contrast, short-term investors might focus on ETFs with higher liquidity and shorter investment horizons, considering market trends and interest rate forecasts.
REIT ETFs can be a valuable component of a diversified investment portfolio, offering exposure to real estate as an asset class without the need for direct property ownership. They can provide balance to a portfolio heavily weighted in stocks and bonds, potentially reducing overall volatility and enhancing returns.
International investors in Singapore REIT ETFs must consider the tax implications in their home countries and in Singapore. Understanding the tax treatment of dividend income, capital gains, and the double taxation agreements between Singapore and the investor's country of residence is essential.
Future Outlook and Trends
The Singapore real estate market is evolving, with emerging trends such as the rise of e-commerce impacting retail properties, increasing demand for industrial and logistics spaces, and the growing importance of sustainable and green buildings. These trends will likely influence the valuation and performance of REITs and REIT ETFs.
In response to market demands and trends, new REIT ETFs with innovative strategies and focuses, such as sustainability and technology, are expected to emerge. These innovations may offer investors new opportunities to gain exposure to specific sectors or themes within the real estate market.
Looking for Other Low-risk Investments?
StashAway Simple™ Plus emerges as a noteworthy alternative for investors exploring Singapore REIT ETFs, offering a promising avenue for cash management with a yield to maturity of 4.5%. Designed to provide a competitive rate with minimal risk, Simple Plus is built on a foundation of short and ultra-short duration bond funds. This diversified mix not only enhances the return but also balances the risks associated with short-term market fluctuations, particularly in environments prone to rapid rate hikes.
StashAway Simple™ Plus maintains a low-risk profile suitable for investors seeking to park their cash with the potential for moderate growth without exposing themselves to high volatility. The portfolio recommends a holding period of at least 12 months to optimize returns, accounting for the inherent short-term volatility of its underlying bonds. Furthermore, the management fee is a modest 0.2% p.a., not included in the broader investment portfolio management fee, making it an economically viable option for savvy investors.
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