Real Estate Investment Trusts (REITs) are companies that invest in property assets and return profits through rents paid by tenants.
They are considered an attractive investment because they offer exposure to a diversified portfolio of commercial properties without the associated risks involved in operating businesses directly.
However, there exists exchange-traded funds (ETFs) just for REITs, diversifying your investments even more, helping you receive more stable dividends!
Best REIT ETFs in Singapore?
Let us explore the topic together.
What are REIT ETFs?
A REIT ETF, also known as a Real Estate Investment Trust Exchange-Traded Fund, is an instrument that tracks an index’s investment results or performance. They can be bought or sold like shares in a stock exchange.
These ETFs are focused on the REIT sector and are excellent choices for investors looking for a hedge against inflation.
Why You Should Consider REIT ETFs
The advantage of investing in REIT ETFs is that they provide you with great diversification and the potential to earn more stable dividends at lower costs.
Besides, it’s robust and provides diversification regardless of market conditions
Unlike stock prices which can be unpredictable, REIT ETFs are more stable and highly liquid. Furthermore, they offer investors high-yield dividends since they filter only the best REITs with great potential to grow.
Another advantage of REIT ETFs is that you can stake passively without worrying about external factors such as management and operations.
Therefore, the risks are minimised which offers you an assurance that your investment will hold steady.
Overall, investing in REIT ETFs enables you to hedge against uncertainties such as inflation and recession.
5 Best REIT ETFs in Singapore
|ETF||What it Tracks||Expense Ratio|
|Phillip SGX APAC Dividend Leaders (SGX: BYJ) (SGX: BYI)||Performance of the base index iEdge APAC Ex-Japan Dividend Leaders REIT Index.||0.50% p.a
|NikkoAM-StraitsTrading Asia Ex Japan REIT ETF (SGX: CFA/COI)||Investment results of the base index before deducting fees and expenses FTSE EPRA Nareit Asia Ex Japan.||0.50% p.a
|Lion-Phillip S-REIT ETF (SGX: CLR)||Performance of Morningstar Singapore REIT Yield Focus Index before deducting fees and expenses.||0.60%|
|CSOP iEdge S-REIT Leaders Index ETF (SRT/SRU)||The performance of the iEdge S-REIT Leaders Index which mostly comprises of S-REITs||0.60%|
|UOB APAC Green REIT ETF (GRN.SI)||The performance of the iEdge-UOB APAC Yield Focus Green REIT Index||Capped at 0.8%|
1. Phillip SGX APAC Dividend Leaders (SGX: BYJ) (SGX: BYI)
Phillip SGX APAC Dividend Leaders REIT ETF is one of the oldest ETFs since its listing on 20th October 2016.
It’s the first on many fronts since it is the pioneer ETF that mainly focuses on the Asia-Pacific REITs.
Since its inception in 2016, the fund has performed remarkably well to register total assets to the tune of US$13,328,569. The fund is listed in USD(BYI) and SGD(BYJ).
Phillip SGX APAC Dividend Leaders ETF’s objective is to provide high mid-to-long-term capital growth by tracking the performance of the base index iEdge APAC Ex-Japan Dividend Leaders REIT Index.
This is before deducting fees and expenses.
The fund seeks to promote risk-adjusted returns beyond the classic market capitalisation-weighted indexes by tracking the underlying index.
The reason is the 30 REITs in the index are ranked and weighted depending on the top dividends paid in the previous year through its smart-beta approach.
This is also subject to size, liquidity constraints, and free-float market capitalisation.
Because the ETF tracks the base index, it’s expected that the investments are primarily REITs. It’s also classified as an Excluded Investment Product.
Further, investors can have exposure to the stable real estate market in Asia and expect sustainable income in the long term.
The sector allocation for this fund includes retail at 26.6%, diversified at 51.8%, and Industrial at 12.8%.
As per geographic spread, Australia takes the largest share at 56.3%, Singapore at 29.4%, and Hong Kong at 12.9%.
Generally, the fund receives a high amount of dividend income from the REITs, which is then distributed to investors.
Based on current figures, the index has an impressive annualised dividend yield of 4.22%.
This is due to the weighing approach adopted where investments are only made in high-yielding REITs.
Subsequently, poorly performing REITs are removed, which gives the investors a sense of assurance by exposing their investments to only the top 30 REITs. Therefore, you can expect attractive dividends.
It’s listed as a USD and SGD boosting flexibility and liquidity.
Taking everything into consideration, the EFF has managed to keep its costs low and currently has a 0.50% annual management fee. Besides, the base index is reputable in the Asian region.
2. NikkoAM-StraitsTrading Asia Ex Japan REIT ETF (SGX: CFA/COI)
The fund was listed in 2017 and trades in USD (COI) and SGD (CFA) to track the base index before deducting fees and expenses. In this case, the base index is FTSE EPRA Nareit Asia Ex-Japan.
It’s important to note that the underlying index is a popular worldwide benchmark for listed real estate.
It covers the Asian region except for Japan by market capitalisation to include only those companies that pass certain liquidity thresholds.
Further, it represents the performance of qualifying REITs in South Korea, Thailand, China, Singapore, India, Taiwan, Pakistan, Hong Kong, Philippines, and Malaysia.
From the time NikkoAM-StraitsTrading Asia Ex Japan REIT ETF started trading, the dividends have continued to grow and are currently being invested at 6.17% against the benchmark return of 7.0%.
On top of that, the fund currently stands at SGD 339.22 million and is domiciled in Singapore.
Along with, the underlying index provides Singapore and Hongkong REITs based components. For instance, some of the top holdings include Capitaland Integrated Commercial Trust, Ascendas Real Estate Investment Trust, Link Real Estate Investment Trust, and Mapletree Logistics Trust at 10.4%, 9.8%, 9.8%, and 6.3%, respectively.
Regarding industry allocation, Retail REITs occupy the largest proportion at 36.9%, followed by Industrial REITs at 30.1%, and Office REITs at 12.1%.
Listed on 29 March 2017, the fund leans towards mid-cap to large-cap stocks. So, it’s a great option for investors seeking to benefit from Asia’s growing real estate sector.
If you have no time to analyse individual stocks or research companies, this fund is the right option for you.
Lastly, the fund has kept its expenses low and currently has a 0.5% p.a management fee.
3. Lion-Phillip S-REIT ETF (SGX: CLR)
Lion-Phillip S-REIT ETF (SGX: CLR) was launched in October 2017. It tracks the investment results of the Morningstar Singapore REIT Yield Index before deducting fees and expenses.
In addition, the fund comprises 27 REITs which are listed on the SGX. Each REIT’s weight is capped at 10%.
As well, it’s created in such a way that it can screen high yielding REITs in Singapore for superiority and better financial health.
Some of the top holdings for this ETF include; Mapletree Logistics Trust at 9.9%, Ascendas Real Estate Investment REIT at 9.9%, and Mapletree Industrial Trust at 9.8%.
Industrial REITs make up the highest percentage followed by Specialised and Retail.
In its 3Q2021 report, the fund manager reported an impressive dividend yield of 4.36% p.a.
The fund’s expense ratio currently is 0.60% which is relatively lower when you compare to other REIT ETFs. Also, the YTD annualised returns of the ETF since inception in 2017 is 6.2% in a situation where all the dividends are reinvested.
Notably, the fund tops high as Morningstar’s strategic beta index applies the proprietary 3-factor rule for investments that primarily emphasises dividend yield, financial health, and business quality.
This fund is suitable for investors looking for exposure to revenue-producing real estate in Asian countries. It enables you to diversify your portfolio and benefit from a more stable income opportunity.
Last but not least, you can stake in the ETF via cash or Supplementary Retirement Scheme (SRS).
4. CSOP iEdge S-REIT Leaders Index ETF (SRT/SRU)
The CSOP iEdge S-REIT Leaders Index ETF is a sub-fund of the CSOP SG ETF Series I, a Singapore unit trust. The fund tracks the performance of the iEdge S-REIT Leaders Index which mostly comprises S-REITs.
The fund’s manager applies an indexing-investment strategy or passive management to track its performance. Correspondingly, the manager adopts the replication approach in managing the sub-fund.
This REIT is the latest listed on the Singapore Stock Exchange and is traded in USD (SRU) and SGD (SRT).
Another notable feature of this fund is that its holding comprises reputable REITs such as CapitaLand Integrated Commercial Trust at 10.32%, Ascendas Real Estate Investment Trust at 10.05%, and Mapletree Logistics Trust at 9.84%.
Even though it’s one of the most recent ETFs, the base index is a popular Index that has been around for over 10 years.
The fund’s performance has been consistent, registering a total return of 9.50% over the last 5 years assuming dividends are reinvested. If there was no reinvestment, the return would have been 4.31% + 5.19% in paid out dividends.
In addition, the fund applies the liquidity-adjustment approach to ensure only the most liquid REITs are tracked. This means that the fund only invests in REITs with excellent cash flow and high investor interest.
When compared to classic market-weighting approaches of other ETFs, this fund is more versatile, stable, and robust regardless of the market conditions.
The Industrial REIT holds the largest share of sector allocation at 42.5%, while Office REIT and Retail REITs follow closely at 19.7% and 18.4% respectively.
The REIT’s geographic spread is mainly in Singapore at 64%, Mainland China (4%), Hong Kong (4%), Japan (3%), the US (5%), and Australia at 9%.
There are multiple advantages of investing in this Index: For example, you can invest passively without worrying since the index uses the liquidity-filtering approach and rebalances the most liquid S-REITs.
Overall, the fund is a great choice if you are looking for a competitive, high, and stable dividend yield.
5. UOB APAC Green REIT ETF
The UOB APAC Green REIT ETF lets you stake passively in top-notch and environmentally safe real estate properties with growth prospects.
The ETF is mainly inclined to environmental sustainability and replicates the iEdge-UOB APAC Yield Focus Green REIT index comprising the top 50 REITs in the whole Asia-Pacific region.
The base index Edge-UOB APAC Yield Focus Green REIT index selects the top 50 REITs through the tilting methodology to reward or penalise individual REITs.
Further, the underlying index 12-month trailing dividend yield as per 30th September 2021 reports is 4.25%. With a 0.45% management fee and expenses capped at 2.0% of the ETFs net asset value, investors can expect a lower expense ratio in future.
In terms of global presence, Japan takes the largest share at 40%, Australia at 36%, Singapore at 16%, and Hong Kong comes last at 8%. Each item in the index has a 7.0% weightage and a geographical cap of 40.0% weightage per country.
Some of the largest holdings for this fund include; Scentre Group, Dexus, Mirvac Group, and Link Real Estate Investment Trust.
The fund is one of the newest on the SGX, having been listed on 23rd November 2021. At the time of the listing, the fund had an estimated assets portfolio of approximately S$83.4 million.
It’s the first of its kind globally that exposes investors to high-quality green REITs and earn potentially high dividend yields. As well, the fund promises sustainability in the future.
The fund’s objective is to advance real estate management as well as operations management that lower greenhouse effects.
It also aims to advance water and energy conservation approaches by real estate corporations within their buildings portfolio. Also, it intends to support the ESG disclosure in real estate companies, including the purpose of green building certification.
The above best REIT ETFs were chosen after analysing their performance over a period of 5 years. This analysis was based on dividend yields, total returns, and diversity provided.
All ETFs performed well during this period, suggesting that these are good choices for investors interested in REITs.
However, when investing, you need to do extensive research first. This includes researching how much money you can afford to spend, whether or not it suits your portfolio, and how much risk you want to take.
Once you’ve determined these, then choose which REITs you want to buy.
If you’re unsure, always talk to a financial advisor.
However, if you’re sure of what you’re doing, choose a brokerage account best for you, and then make your investments.