ETFs, or exchange-traded funds, offer an effective method for investors to gain exposure to a basket of stocks at a low cost.
And if you’re a REIT investor, you’re in luck.
Started in October 2017, the Lion-Phillip S-REIT ETF (SGX: CLR) is the first ETF that allows investors to park their money in a basket of high-quality Singapore REITs.
The total assets under management (AUM) for this ETF is S$289.9 million as of 30 June 2022.
Not only does this ETF pay twice-yearly distributions, but it also has a very low management fee of just 0.5% while providing investors with exposure to a total of 25 REITs.
These REITs cover a wide range of property sub-sectors including retail, industrial, commercial, hospitality, and healthcare.
Here is what S$10,000 will buy you when you allocate this sum to the Lion-Phillip S-REIT ETF.
A basket of solid REITs
The great thing about this ETF is that the exposure to each REIT is capped at a maximum of 10%, and should any of the holdings exceed 10%, it will be rebalanced twice yearly in June and December.
What this means is that an investor in the Lion-Phillip S-REIT ETF will not be over-exposed to any single REIT.
Next, we look at the top 10 holdings within the ETF.
As of 30 June 2022, the ETF has the highest weight (of 10% each) in Mapletree Industrial Trust (SGX: ME8U) and Mapletree Pan Asia Commercial Trust (SGX: N2IU).
Both REITs are from Mapletree Investments Pte Ltd’s stable of REITs and enjoy having a strong sponsor and quality assets.
Next in line are CapitaLand Ascendas REIT (SGX: A17U) at 9.9%, Frasers Centrepoint Trust (SGX: J69U) at 9.7% and CapitaLand Integrated Commercial Trust (SGX: C38U) at 9.2%.
These three REITs are anchored by strong sponsors in the property giants CapitaLand Investments Limited (SGX: 9CI) and Frasers Property Limited (SGX: TQ5).
Next, Mapletree Logistics Trust (SGX: M44U) comes in with an 8.2% weight.
Together, these six REITs take up the bulk of the ETF, occupying a 57% weight.
The remaining four REITs comprise Parkway Life REIT (SGX: C2PU), Keppel DC REIT (SGX: AJBU), Frasers Logistics & Commercial Trust (SGX: BUOU) and Suntec REIT (SGX: T82U).
Together, these four REITs take up 22% of the weight of the ETF.
It is interesting to note that even though the Lion-Phillip S-REIT ETF contains 25 REITs, the top 10 REITs occupy the overwhelming majority in terms of weight, at 79%.
REITs with the smallest weights include Frasers Hospitality Trust (SGX: ACV) and Far East Hospitality Trust (SGX: Q5T), with 0.2% and 0.3% weight, respectively.
A healthy dividend yield
At S$0.929 per unit now, S$10,000 can buy you around 10,700 units of the ETF.
The latest distribution for the REIT amounted to S$0.026 per unit, so the annualised distribution per unit for the ETF is S$0.052, giving it a forward distribution yield of 5.6%.
With 10,700 units, you can expect an annual dividend of S$556.40 or around S$46 per month.
This yield is not too shabby when you compare the ETF’s yield to several alternatives such as Singapore Savings Bonds (SSB) and bank deposits.
For instance, United Overseas Bank Ltd (SGX: U11) recently raised the promotional interest rates for its 15-month fixed deposit to 3%, but you will need to park at least S$20,000 to enjoy this rate.
The latest October issue of the SSB provides an average return of 3.25% per annum over a decade and 3.08% for the first year.
Professionally managed with a creditable performance
If you’re wondering whether the ETF has done well since its inception, the answer is “yes”.
From inception till 30 June 2022, the Lion-Phillip S-REIT ETF provided a total return of 4.5% per annum.
This return was slightly below the 4.9% chalked up for the benchmark index, Morningstar Singapore REIT Yield Focus Index.
The difference can be attributed to the management fee of 0.5%.
Remember that buying this ETF also means that you are delegating the portfolio selection and investment to a professional manager – Lion Global Investors Limited.
The manager is a member of OCBC Ltd (SGX: O39) with a total AUM of S$68.4 billion as of 30 June 2022.
Established in 1986 as an Asian asset specialist, Lion Global Investors has expertise in managing Asian equities for retail and institutional investors and has a team of 40 investment professionals.
So, rest assured that your capital is well-managed when you invest in the Lion-Phillip S-REIT ETF.
In addition, you will also enjoy a healthy dividend yield of 5.6% that looks set to grow if the underlying REITs raise their DPU over time.
Is it a good time to buy into Singapore REITs? If you’ve thought about it, then our latest REITs guide will be an essential read. This exclusive pdf report shows you why REITs are still excellent assets, what sectors to look out for and how to find good REITs today. The info inside can help you build a solid retirement portfolio. Click here to download it for FREE.
Disclaimer: Royston Yang owns shares of Mapletree Industrial Trust, Suntec REIT, Frasers Logistics & Commercial Trust and Keppel DC REIT.