I like to think of building an investment portfolio like ordering nasi lemak from our favourite stall – some of us may like to invest in individual companies (akin to choosing our favourite few dishes), while others may like to invest in an Exchange Traded Fund, or ETF, which consists of a basket of companies (just like opting for a set meal for those who do not have any particular preferences, or simply hate to make particular choices.)
So, which one is a better option? In my opinion, there’s no right or wrong answer here – at the end of the day, you must be comfortable with the investment decisions you eventually make (after all, they are your hard-earned money that you’ve spent years, or even decades, accumulating.)
However, one thing I’ve noticed from some of my readers when I asked them why they have not started building their investment portfolio yet (despite knowing that they need to do so, or else their money may lose value due to the effects of inflation – typically at around 3% per year) is that they simply do not have the time nor energy to study about a company after a long day of work (which I completely understand.) As such, the next best thing I would recommend is to invest in an ETF – speaking of which, CSOP Asset Management Pte. Ltd. have, on 18 November 2021, listed a REIT ETF (called the CSOP iEdge S-REIT Leaders Index ETF) on the Singapore Exchange.
In the rest of today’s post, I’ll attempt to share some essential information you need to know about this new ETF on the block:
What is the Objective of the ETF?
According to the ETF’s website, I understand that the objective is to replicate as closely as possible the performance of the iEdge S-REIT Leaders Index – which is an adjusted free-float market capitalisation weighted index that measures the performance of the most liquid Real Estate Investment Trusts (or REITs) listed on the Singapore Exchange – you can read more about the iEdge S-REIT Leaders Index here.
What are the REITs Included in this ETF?
Before you make any investment decisions on any ETFs, my advise to fellow investors is to first get a good knowledge on the list of companies that it comprises.
For the case of CSOP iEdge S-REIT Leaders Index ETF, it comprises a total of 28 of the most liquid REITs (with a total net asset value of S$116.9m.) As the top 10 constituents comprise a huge weightage towards the entire ETF (at 77.29%), and they are as follows (with its weightage at the time of writing this post in brackets, along with a brief information about the REIT):
1. CapitaLand Integrated Commercial Trust (SGX:C38U – 10.71% Weightage)
Formed as a result of a merger with another blue-chip REIT in CapitaLand Commercial Trust, CapitaLand Integrated Commercial Trust is currently the largest REIT listed on the Singapore Stock Exchange (and the REIT also has the highest weightage in the ETF.) Its property portfolio comprises of 11 retail malls, 6 office buildings, and 5 integrated developments all located in Singapore, and 2 office buildings located in Frankfurt, Germany.
2. Ascendas REIT (SGX:A17U – 9.90% Weightage)
Singapore’s first and largest listed business space and industrial REIT, Ascendas REIT, takes second place in terms of weightage in the ETF. Its properties are located in the following geographical locations (with its percentage of concentration out of its total investment properties in brackets): Singapore (62%), Australia (13%), United States (13%), and United Kingdom/Europe (12%.) In terms of property type, they are as follows (with its percentage concentration out of its total investment properties in brackets): Business & Science Park Properties/Offices, as well as Suburban Offices (50%), Logistics and Distribution Centre (21%), High Specification Industrial Properties, Light Industrial Properties & Flatted Factories, and Integrated Development, Amenities, and Retail (20%), and Data Centre (9%).
3. Mapletree Logistics Trust (SGX:M44U – 9.51% Weightage)
Mapletree Logistics Trust is Singapore’s first Asia-focused logistics REIT, where its logistics properties are strategically located near major expressways and established logistics clusters in the following 9 geographic locations (with its concentration out of its total assets under management in brackets): Singapore (24.1%), Hong Kong SAR (24.7%), China (16.8%), Japan (11.2%), South Korea (8.2%), Australia (7.7%), Malaysia (4.7%), Vietnam (1.8%), and India (0.8%).
4. Mapletree Commercial Trust (SGX:N2IU – 9.31% Weightage)
Mapletree Commercial REIT’s portfolio comprises of 5 properties all located in Singapore (in fact, 4 of them are located in the Harbourfront precinct) – they are retail mall VivoCity (which is the largest mall Singapore), Mapletree Business City (one of the largest integrated developments in Singapore), mTower (formerly known as PSA Building, it is an integrated development comprising of a 40-storey office block, and a 3-storey retail centre, the ARC), Bank of America Merrill Lynch Harbourfront (a premium 6-storey building), as well as Mapletree Anson (a 19-storey premium office building located in Tanjong Pagar – this is the only property that’s not located in the Harbourfront precinct.)
5. Mapletree Industrial Trust (SGX:ME8U – 8.85% Weightage)
Mapletree Industrial Trust’s property portfolio includes Data Centres, Hi-Tech Buildings, Business Park Buildings, Flatted Factories, Stack-up/Ramp-up Buildings and Light Industrial Buildings, all of them strategically located in established industrial estates and business parks. In terms of geographical concentration, 86 of its properties are located in Singapore, and 57 are located in North America (including 13 data centres which the REIT holds together through the joint venture with Mapletree Investments Pte Ltd.)
6. Frasers Logistics & Commercial Trust (SGX:BUOU – 8.48% Weightage)
Previously known as Frasers Logistics & Industrial Trust, the enlarged REIT was formed as a result of a merger with Frasers Commercial Trust on 29 April 2020, and renamed as Frasers Logistics & Commercial Trust with effect from 04 May 2020. Its portfolio comprises a total of 103 logistics, industrial, and commercial properties the following geographic locations (with the number of properties in each country in brackets): Australia (62), Singapore (2), Germany (29), the United Kingdom (4), as well as in the Netherlands (6).
7. Keppel DC REIT (SGX:AJBU – 6.92% Weightage)
Keppel DC REIT is the first, and currently the only pure-play data centre REIT listed on the Singapore Exchange. Currently, its data centres are located in the following countries (with the number of data centres in brackets): Singapore (6), Australia (2), Malaysia (1), Germany (2), Ireland (1), Italy (1), the Netherlands (3), as well as in the United Kingdom (2). Additionally, in its latest Q3 FY2021 (ended 30 September 2021) update, it was mentioned that the REIT have also acquired a data centre in China, with completion expected to be in the fourth quarter.
8. Keppel REIT (SGX:K71U – 5.39% Weightage)
Keppel REIT is an office REIT with its portfolio comprising of 10 Grade A commercial assets strategically located in key business districts in Singapore (its assets include a 79.9% interest in Ocean Financial Centre, one-third interest in Marina Bay Financial Centre, one-third interest in One Raffles Quay, and 100% interest in Keppel Bay Tower), key Australian cities of Sydney (its assets include a 50% interest in 8 Chifley Square, and a 100% interest in Pinnacle Office Park), Melbourne (its assets include a 50% interest in 8 Exhibition Street, along with a 100% interest in 3 adjacent retail units, and a 50% interest in Victoria Police Centre), and Perth (where they have a 50% interest in David Malcolm Justice Centre), as well as in Seoul, South Korea (where they have a 99.4% interest in T Tower).
9. Suntec REIT (SGX:T82U – 4.41% Weightage)
Suntec REIT’s portfolio consists of retail, office and convention centre assets in Singapore, Australia, and in the United Kingdom. Its assets in Singapore include a 59.0% interest in Suntec City Office Towers, 100.0% interest in Suntec City Mall, and a 66.3% interest in Suntec Singapore Convention and Exhibition Centre, a 33.3% interest in One Raffles Quay, and a 33.3% interest in MBFC (Marina Bay Financial Centre) Properties. Its assets in Australia include a 100.0% interest in 21 Harris Street in Pyrmont, Sydney, 177 Pacific Highway in Sydney, and 55 Currie Street in Adelaide, along with a 50.0% interest in Southgate Complex in Melbourne, as well as in Olderfleet, 477 Collins Street in Melbourne. Finally, its assets in United Kingdom include a 50.0% interest in Nova Properties in London, as well as a 100.0% interest in The Minister Building in London.
10. Frasers Centrepoint Trust (SGX:J69U – 3.81% Weightage)
Frasers Centrepoint Trust is a retail REIT with a total of 9 retail malls all located in the heartlands of Singapore – Causeway Point, Waterway Point (where the REIT holds a 40.0% interest), Tampines 1, Northpoint City North Wing (including Yishun 10 retail podium), Tiong Bahru Plaza, Century Square, Changi City Point, Hougang Mall, and White Sands. Its portfolio also has an office property in Central Plaza (located in Tiong Bahru), which was added following the completion of the REIT’s acquisition of AsiaRetail Fund Limited in October 2020.
The remaining 18 REITs (along with its weightage) that make up the ETF are:
- Mapletree North Asia Commercial Trust (SGX:RW0U – 3.40% Weightage)
- Ascott Residence Trust (SGX:HMN – 2.10% Weightage)
- Parkway Life REIT (SGX:C2PU – 2.07% Weightage)
- CapitaLand China Trust (SGX:AU8U – 2.04% Weightage)
- ARA LOGOS Logistics Trust (SGX:K2LU – 1.88% Weightage)
- Ascendas India Trust (SGX:CY6U – 1.71% Weightage)
- ESR REIT (SGX:J91U – 1.50% Weightage)
- LendLease Global Commercial REIT (SGX:JYEU, 1.28% Weightage)
- Keppel Pacific Oak US REIT (SGX:CMOU, 1.03% Weightage)
- CDL Hospitality Trusts (SGX:J85 – 1.02% Weightage)
- Cromwell European REIT (SGX:CWBU – 1.00% Weightage)
- Manulife US REIT (SGX:BTOU – 0.79% Weightage)
- AIMS APAC REIT (SGX:O5RU – 0.65% Weightage)
- Starhill Global REIT (SGX:P40U – 0.47% Weightage)
- SPH REIT (SGX:SK6U – 0.44% Weightage)
- Prime US REIT (SGX:OXMU – 0.37% Weightage)
- OUE Commercial REIT (SGX:TS0U – 0.35% Weightage)
- Far East Hospitality Trust (SGX:Q5T – 0.31% Weightage)
The Index weighs the included REITs based on a liquidity-adjustment strategy that captures high investors’ interest, fund flows, and sector rotation – which is more robust and smarter compared to the traditional market-cap weighting.
Also, each of the index constituents will consist of no more than 10% weightage, and a review will be conducted twice annually – once in March, and another time in September, where a poor performing REIT may be replaced with a better performing one.
For those who have concerns about diversification, in my opinion, the ETF is well-diversified in that the REITs have properties belonging to different asset classes (you have retail, office, industrial, logistics, hospitality, and data centre REITs). Additionally, about 50.0% of the index is in industrial, logistics, warehousing and data centres, which are very relevant in today’s Covid-19 world (as these sectors are key beneficiaries as a result of the pandemic.)
Another point to note is that, many of the REITs have properties located in various countries around the world (so in a way, geographical diversification is ensured as well.)
How Can You Invest in the ETF?
Investing in this ETF on the Singapore Exchange (you have the option to trade in SGD – via the ticker symbol SGX:SRT, or in USD – via the ticker symbol SGX:SRU) in the same as how you buy and invest in any stocks via your brokerage platform.
For those of you who are using Tiger Brokers as their trading platform, there’s an ongoing collaboration going on between CSOP and Tiger – where you can stand a chance to win up to SGD1,000.00 worth of shares when you invest in CSOP iEdge S-REIT Leaders Index ETF during the period from 01 December 2021 to 31 December 2021. The promotion link is here: https://bit.ly/31okBHX
To qualify for the promotion, you’ll need to invest in the CSOP iEdge S-REIT Leaders Index ETF with a minimum total contract value of SGD 5000 during the promotion period 01 December 2021 to 31 December 2021 (both dates inclusive) via the Tiger Brokers trading platform. Terms and conditions apply.
Will You Receive Any Dividends as a Shareholder of the ETF?
Yes, you will be receiving a dividend payout as a shareholder of the ETF on a semi-annual basis (in May, as well as in November.)
As far as the yield is concerned, from my understanding, it is expected to be about 5% (which is 1% better compared to the interest rates when you put your money in the CPF Special Account.)
In terms of sustainability of its yield, from my understanding, the iEdge S-REIT Leaders Index is projected to deliver a growth of 5.93% and a yield of 5.43% in 2022 (according to Bloomberg Terminal as at 30 September 2021, and highlighted in rectangular boxes below), and as the CSOP iEdge S-REIT Leaders ETF tracks the performance of this Index, the yield in the year ahead will be somewhat similar:
Personally, I feel that the CSOP iEdge S-REIT Leaders Index ETF is good for individuals who would like to invest in REITs, but yet at the same time do not have the time to study each and every one of them, as you will get instant diversification into the various assets (as each of the 28 REITs have different property types in their portfolio) and also into different countries (as some of the REITS have properties in other countries.)
Also, in terms of its yield, at 5.0% currently (from my understanding, but it is largely dependent on the distribution payout of the REITs in its constituents – particularly the top-10 REITs in terms of weightage), it beats the rate of fixed deposits, and also the interest rates of the CPF Special Account. As to whether or not there are any risks associated with the dividend payout, personally, I feel the risk is very small, as the 10 REITs that have the heaviest weightage in this index are fundamentally sound (in fact, out of the 10 REITs, I am personally invested in 8 of them for the long-term, and if you have been following my write-ups on the performance of these 8 REITs every quarter when they release their results, you’ll know that they have been pretty resilient.)
Finally, backtesting has revealed that the CSOP iEdge S-REIT Leaders ETF has higher annualised returns over the last 5 years when compared against the global REIT indices:
With that, I have come to the end of my look into the CSOP iEdge S-REIT Leaders Index ETF. That said, this post does not constitute any recommendation to buy or sell the ETF. As always, you should do your own due diligence before you make any investment decisions.
Disclaimer: This post was written in collaboration between The Singaporean Investor and CSOP Asset Management Pte. Ltd., where the former has received a monetary compensation from the latter for the writeup.
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