Investors continue to favour Reit ETFs

THE ascent of passive investing saw assets under management (AUM) in pure Reit Exchange Traded Funds (ETFs) exceed US$40 billion globally. The combined AUM of Reit ETFs with exposure to Asia-Pacific ex-Japan was close to US$770 million as at end April 2021.

The two largest Reit ETFs across Asia-Pacific ex-Japan are listed on the Singapore Exchange (SGX) - NikkoAM-StraitsTrading Asia ex-Japan Reit ETF which tracks the FTSE EPRA Nareit Asia ex-Japan Reits 10% Capped Index and the Lion-Phillip S-Reit ETF which tracks the Morningstar Singapore Reit Yield Focus IndexSM.

SGX also lists a third Reit ETF - the Phillip SGX APAC Dividend Leaders Reit ETF which tracks the iEdge APAC ex-Japan Dividend Leaders Reit Index.

The combined AUM of the three SGX-Reit ETFs has seen a significant 41 per cent growth, from S$395 million in April 2020 to S$558 million in April 2021, making up more than half of the AUM in Reit ETFs with Asia-Pacific ex-Japan exposure globally.

As of May 25, 2021, their combined AUM has risen further to S$571 million. Retail investors account for close to 40 per cent of all SGX listed Reit ETF holdings while the remaining 60 per cent are in the hands of institutional investors. Despite generating average year-to-date total returns of 2.5 per cent (as at May 25, 2021), compared to 11.6 per cent by the STI ETFs, the three Reit ETFs recorded net inflows of S$108.7 million.

During the same period, the two ETFs which track the performance of the STI Index - SPDR Straits Times Index ETF and Nikko AM Singapore STI ETF - saw total net outflows of S$63 million instead, amid investor profit-taking. ETFs provide investors instant diversification across various sub-sectors and geographical regions at lower execution costs as opposed to building a similar portfolio through investing in individual Reits.

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Due to its diversified nature, the best performing Reit ETF for the year was Phillip SGX APAC Dividend Leaders Reit ETF, which generated total returns of 5.8 per cent. It has more than 50 per cent geographical exposure to Australian Reits, 35 per cent to Singapore Reits, 13 per cent to Hong Kong Reits and one per cent to Thailand Reits.

The various underlying Reit markets - Hang Seng Reit Index (+9.8 per cent), ASX 200 A-Reit Index (+5.0 per cent) and iEdge SG S-Reit Index (+1.7 per cent) - saw varied total returns performance in the 2021 year-to-date.

Across the same period, the NikkoAM-StraitsTrading Asia ex-Japan Reit ETF (75 per cent in Singapore Reits and a combined 25 per cent exposure to the Hong Kong, Malaysia, India and Thailand Reit markets) and Lion-Phillip S-Reit ETF (100 per cent in Singapore Reits) generated total returns of 0.5 per cent and 1.1 per cent respectively, lagging behind the Phillip SGX APAC Dividend Leaders Reit ETF.

However, the NikkoAM-StraitsTrading Asia ex-Japan Reit ETF was the highest yielding Reit ETF among the three with 12 month gross dividend yield of 4.7 per cent compared to Lion-Phillip S-Reit ETF and Phillip SGX APAC Dividend Leaders Reit ETF at 4.2 per cent and 2.6 per cent respectively.

The NikkoAM-StraitsTrading Asia ex-Japan Reit ETF and Lion-Phillip S-Reit ETF are among the top 10 highest yielding ETFs listed on SGX. SGX RESEARCH

• For more research and information on Singapore's Reit sector, visit sgx.com/research-education/sectors for the monthly S-Reits & Property Trusts Chartbook.
• Source: SGX Research S-Reits & Property Trusts Chartbook.