Exchange Traded Funds (ETF) – Reits Version

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The Singapore equity market is really slow to say and there are only a handful of reits ETFs that were launched previously (that was like 3 to 4 years ago). Quite a number of people were rather yield starved back then. With that bullish USD interest rate hike (Before Covid-19) it was almost a guarantee that this will happen.

I kind of blame the media for setting off such rumours. The central bank will never act on just pure speculation but rather more than data and in today’s world. There will be even more data that they can ever get. A big economy like the USA is something that most people watch. This trend has slowly diminished after successful propaganda by the emergence of the Chinese. Don’t get me wrong, it is kind of good that they are getting their act together. It is just that there’s much more skepticism more than ever since anything and everything can be fake. The Chinese just look at profits over anything.

Back to the point here. I was trying to look for yield related stuffs that could add on to the portfolio. When I did a quick filter away from reits, there isn’t much that is available on the SGX that is sizeable. (i.e. blue chip enough) To diversify that reits risk, I went into the details and tried to see if I could mimic the fund portfolio. As it turns out, it might be too much of a challenge.

Diversification

Diversity lies in the location: Singapore, Hongkong, China, Australia with the scope to add on more countries according to the fund manager. (Exposes some FX risks along with fees, fund management, platform fees)

Diversity in the types of holdings: Office, retails, industrial, others and more diversified real estates (Exposes to certain sectors that are cyclical in nature)

Lower fees as compared to a fund, as it is structured as an ETF (Exchange Traded Funds), it’s annual management fees are also lesser than usual. (Cheaper but more passively managed)

Yield: Approximately 4-5% p.a. Nett for all the trouble. Perhaps even using different brokers and also different FX rates. Believe it or not, institutions get a better Forex rate just because they have the size to do so and sometimes. The fees on the allocation can be rather cheaper than a retail customer. It’s pretty much how you value it. Some people prefer total control, counting the pennies. (every cents counts) Some prefer to delegate via a fee based model.

Reits ETF

NIKKO AM – Straits Trading Asia Ex Japan ETF (Check that out here: Nikko AM reits ETF)

Philips SGX APAC dividend Leaders reit ETF (Check that one here: Poems reits ETF)

Both are much similar in context just that with Philips, the majority holdings will be Australian reits (about 60%) while Nikko AM will be the majority with Singapore reits (about 60%).

Always do your due diligence, after all everyone has different risk levels. There are always other options. ETFs are just one of the many tools.

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