The Singapore Exchange (SGX: S68) is home to 42 REITs and property trusts.
These REITs and trusts manage buildings in a wide variety of property classes, such as retail, office, residential, hospitality, industrial, logistics and healthcare.
However, many Singapore REITs, or S-REITS, only focus on one particular asset class.
This means that investors must purchase multiple REITs to diversify their investment portfolio.
If that sounds like too much work, you might want to consider the Lion-Phillip S-REIT ETF (SGX: CLR), which aims to fully replicate the Morningstar Singapore REIT Yield Focus Index.
Before you buy, take some time to acquaint yourself with these key facts (figures are as of 30 September 2021, unless otherwise stated):
- The index is designed to identify high-yielding S-REITs with strong competitive moats and good financial health.
- As of 30 September 2021, the ETF consists of 27 REITs, although the number of constituents may change from time to time.
- Each index constituent has a weightage cap of 10%, although market movements may cause some holdings to exceed 10% in between rebalancing dates. The index is rebalanced twice a year in June and December.
- Mapletree Logistics Trust (SGX: M44U) is the largest constituent of the ETF, holding a weightage of 9.9%. It is followed by Ascendas REIT (SGX: A17U) at 9.9% and Mapletree Industrial Trust (SGX: ME8U) at 9.8%.
- Industrial REITs have the largest representation in the ETF, with 35.7% of the fund allocated to the sector. The second-most represented sector is retail, with a 32.8% exposure.
- With a fund size of S$223.6 million, the Lion-Phillip S-REIT ETF is substantially larger than another SGX-listed REIT ETF, the Phillip SGX APAC Dividend Leaders REIT ETF (SGX: BYI), which has a fund size of US$17.3 million.
- However, the fund size does pale in comparison to SPDR STI ETF (SGX: ES3), which tracks the Straits Times Index (SGX: ^STI). The SPDR STI ETF had assets under management of S$1.7 billion as of 28 October 2021.
- The annualised return of the Lion-Phillip S-REIT ETF since the fund’s inception in October 2017 is 6.2%, assuming all dividends are reinvested.
- In the same time period, the benchmark index has provided an annualised return of 6.6%, leaving the fund’s tracking error at 0.4%.
- In 2020, the fund charged an expense ratio of 0.60%, a relatively affordable fee compared to other REIT ETFs.
Get Smart: Convenience at a cost
All things considered, the Lion-Phillip S-REIT ETF is a convenient way for investors to diversify their investment portfolio into various property types.
Over 85% of S-REITs own properties outside Singapore, so investors also benefit from geographic diversification.
However, this convenience comes at a cost.
Apart from the expense ratio of the ETF itself, the underlying REITs also collect management fees before distributing returns to shareholders.
This means that investors in REIT ETFs are paying two layers of fees on a recurring basis.
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Disclosure: Herman Ng owns shares of Mapletree Industrial Trust.