Singaporeans love property investment and passive income.
It is of no surprise that Singapore REITs became one of the most popular investment products in recent years.
With little capital, any investor can become pseudo landlords and collect dividends, without having to manage the properties.
But investors also realise the complexity of analysing individual REITs and having to deal with rights issues that come along once in awhile, which leaves them wondering if they should subscribe or risk diluting their shareholdings.
Seeing an opportunity in the REITs investing scene, ETF providers have listed 2 REIT ETFs recently. Now, the third one is in the midst of listing.
This article sheds some light into the latest, up and coming REIT ETF; Lion-Phillip S-REIT. Plus, we compare it with the existing REIT ETFs.
What Is Lion-Phillip S-REIT ETF
Lion-Phillip S-REIT (SGX:CLR) is the first and only local-focused REIT ETF in Singapore. It is jointly launched by Lion Global Investors and Phillip Capital Management.
What differentiates Lion-Phillip S-REIT from its two predecessors; Phillip SGX APAC Dividend Leaders REIT ETF and NikkoAM-StraitsTrading Asia ex Japan REIT ETF, is that it is the only S-REIT ETF without overseas exposure.
Lion-Phillip S-REIT ETF
Phillip APAC SGX REIT ETF
Nikko AM Asia Ex Japan REIT ETF
Singapore – 100%
Australia – 53.5%
Singapore – 60.5%
Table 1: Geographical Diversification of the REIT ETFs in Singapore
Who Should Invest
According to the Fund Brochure, investors will benefit from:
Low-cost Easy Access to High-quality S-REITs — Instead of purchasing each REITs individually which may incur more brokerage fee. Investors only need to pay a single commission fee to buy the ETF. Investors also need not worry about corporate actions like right issues.
23 High-quality S-REITs in a Fund — Selected S-REITs are screened by Morningstar for superior quality and financial health.
Sustainable Income Stream and Potential Capital Growth — Collecting dividend income and capital gain which is reflected on the increasing ETF unit prices.
Diversification of Portfolio Risk — Security risks are diversified to over a portfolio of 23 REITs.
Benchmark / Index
Lion-Phillip S-REIT ETF
Morningstar® Singapore REIT Yield Focus IndexSM
Lion Global Investors Limited
Phillip Capital Management (S) Ltd
0.50% Per Annum
Total expense ratio
0.60% Per Annum (max. for first two years)
EIP / SIP Classification
EIP / SIP Classification
Number of Index Securities
Semi-Annual (June and December)
Single Security Maximum Weight
How It Works
The S-REIT ETF tracks the performance of Morningstar® Singapore REIT Yield Focus IndexSM. The index follows a broad-based income strategy and selects Singapore REITs based on three core proprietary factors: Quality; Financial Health and Dividend Yield.
Lion-Phillip S-REIT ETF also considers the underlying REITs liquidity when deciding the individual REIT weightage on its portfolio.
The index will be rebalanced semi-annually (Jun & Dec), with a maximum weightage of 10% on a single REIT.
How To Subscribe Or Buy Lion-Phillip S-REIT ETF
2nd – 17th Oct 2017
30th Oct 2017
1,000 units (Incremental of 1,000 thereafter)
0.1% or minimum S$10 (subject to 7% GST)
Regular Savings Plan:
Phillip Securities Pte Ltd, DBS Vickers Securities (Singapore) Pte Ltd, Commerzbank AG and UOB Kay Hian Pte Ltd
The Lion-Phillip S-REIT ETF has been launched on 30th Oct 2017.
Investors who want to participate on the offer must purchase through the Participating Dealers i.e DBS Vickers and UOB Kay Hian with an irrevocable form submission within the offering period. The money will be transferred at 18 Oct 2017.
The minimum quantity is set at 1,000 and subject to a minimum placement fees of $10 or 0.01% of the total units value.
Do note that the min. units of 50,000 units mentioned in the FAQ refers to Participating Dealers who purchase from Phillip Capital / Lion Global. As retail investors, we are buying from Participating Dealers; i.e min 1,000 units.
The Share Builder Plan program will be available on Nov 2017 onwards. This allows an investor to buy the units on a monthly basis with as little as S$100 per month.
Since this is an issuance of ETF, there will be no limitation to the supply of the units as the ETF provider can simply create additional units to meet the demand. Hence, retail investors would get full allotment.
After Initial Offer Period
Investors who do not apply during Initial Offer Period can still purchase Lion-Phillip S-REIT ETF on 30 Oct 2017 when it is listed on SGX. They will be traded at a lot size of 100 units like stocks.
S-REITs ETFs Comparison
(Phillip SGX APAC Dividend Leaders vs NikkoAM-StraitsTrading Asia ex Japan vs Lion-Phillip)
Phillip SGX APAC Dividend Leaders REIT ETF
NikkoAM-StraitsTrading Asia ex Japan REIT ETF
Lion-Phillip S-REIT ETF
Index that ETF Tracks
SGX APAC Ex-Japan Dividend Leaders REIT Index
FTSE EPRA/NAREIT Asia Ex Japan Net Total Return REIT Index
Morningstar Singapore Reit Yield Focus IndexSM
No. of REITs
Top 3 constituents
Link REIT (10.98%), Scentre Group (9.16%) & Westfield Corp (7.85%)
LINK REIT (9.96%), ASCENDAS REIT (9.7%) & SUNTEC REIT (9.56%)
CapitaLand Mall Trust (10.76%), CapitaLand Commercial Trust (10.25%) & Suntec REIT (9.89%)
Australia, Hong Kong, Singapore
Hong Kong, Malaysia, Singapore
Dividend Yield Range
4% to 5%
4% to 5%
4% to 5%
Differences between the 3 REITs ETFs in Singapore
#1. Diversification — The Lion-Phillip S-REIT ETF is concentrated in Singapore REITs and hence lacks the diversification that the other two REIT ETFs offer. However, some local investors prefer Singapore REITs and would not mind investing in a basket of 23 local REITs.
A common feedback we've noticed from investors is that they do not like the large exposure to Australian REITs (53.5%) in Phillip SGX APAC Dividend Leaders REIT ETF. We all experience home bias, don't we?
Our view is that geographical diversification is necessary if one wants to lower his risk, because the property rental market may not be always rosy in Singapore. International property markets may perform better at times, and the overall returns should be smoother with a diversified portfolio.
#2. Fees — Phillip SGX APAC Dividend Leaders REIT ETF has the lowest management fee of 0.3% while the other two ETFs are charging 0.5%. ETF fees are generally low and it is a fair price even at 0.5%, so we won’t haggle on the difference. Some investors prefer to own the REITs directly and not pay this fee.
However, it is important to note that buying individual REITs requires more effort and an investor would be paying with time when doing research. Your man hours could be worth much more than the management fee in the end.
Also, an ETF would take away all the hassle of deciding what to do with a rights issue. An investor with little capital could also pay a small fee to achieve a diversified portfolio of REITs.
#3. Dividend Yield — The dividend yield of the REIT ETFs ranges between 4% to 5%. It is difficult to estimate with high accuracy because the individual REIT may change their DPUs along the way and affect the average REIT ETF yields. But we can have a high degree of confidence the yield should range between 4% to 5%.
As most of the REIT ETFs are rather young, it would take some time before we can evaluate their actual dividend yields. It is too early to determine which has higher yield, and the difference would be minute even if it exists.
We cannot emphasize enough that past historical dividend yield is not indicative of future performance. Hence, an investor should not choose the ETF solely on the yield alone. It would be more prudent to consider the degree of diversification and fees mentioned above.
Q: Is the Fund filed under an Excluded Investment Product ("EIP") immediately?
It is safe to say that yes, this fund is classified as an EIP.
This classification means that investors can efficiently use the capital and invest it via common stocks without having to complete the Customer Account Review (CAR) nor applying for an SGX Online Education Programme.
Q: Can investors use the Fund through the Supplementary Retirement Scheme (“SRS”)?
After the IPO, all the investors can easily apply for this fund with the help of their brokers or SRS operator via SRS.
However, during the IPO investors can only invest in it using cash.
Q: Is this Fund part of the CPF Investment Scheme (CPFIS)?
No, the fund is not currently included in the CPFIS.
Q: What happens when there's a Rights Issue from the underlying REITs?
Right Issues will be managed by the Lion-Phillip S-REIT ETF Fund Manager. It's underlying index is the Morningstar Singapore Reit Yield Focus IndexSM which adjusts for Rights. This means it is likely for Lion-Phillip S-REIT ETF to accept right issues in order to track its underlying index accurately. We think the manager would use part of the dividends collected to reinvest in the rights. However, we are not sure how the ETF Fund Manager would manage the fund, should there be insufficient cash to subscribe to the right issues.
Tell Us What Do You Think?
We hope you now have a clear understanding what the Lion-Phillip S-REIT ETF is about.
So, tell us what do you think about this ETF: would you be investing or maybe you prefer to pick your own REITs for greater returns?
Either way, leave us a quick comment below.
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