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REITs – Self-manage vs ETFs

I was speaking to a few friends over the upcoming launch of a 3rd ETF – Lion-Phillip S-Reit ETF, while at the same time taking a deeper look into the cost and structure of ETFs in Singapore. So here comes the newly published article about ETFs.

There are no spoilers about what to expect of ETFs, rather a clear indicator base upon available information from the various websites to justify if it is worthwhile to enter the ETFs for REITs for passive tracking. And this does not constitute any form of investment advice too. It is purely my own opinion in relation to buying ETFs versus own stock pocking when it comes to Asian Listed stocks – which I do own a handful directly and indirectly through custodian accounts.

Buying into REITs ETF

So here comes the lay down on the 3 REITs ETF available in Singapore.

A. Phillip SGX APAC Dividend Leaders REIT ETF

The investment objective of the Fund is to seek to provide a high level of income and moderate long-term capital appreciation by tracking, as closely as possible, before expenses, the performance of the SGX APAC Ex-Japan Dividend Leaders REIT Index.

The ETF seeks to provide a high level of income and moderate long-term capital appreciation by tracking the investment results of 30 publicly traded equity REITs in the Asia Pacific ex-Japan region. The fund will benchmark against theSGX APAC Ex-Japan Dividend Leaders REIT Index. While the index measures the performance of 30 REITs that pay the largest total dividends while observing size, representation, free-float and liquidity constraints.

Annual fees per Product highlight sheet:

Manager’s fee
Currently 0.50% p.a of the Net Asset Value of the Fund.
Maximum 0.80% p.a of the Net Asset Value of the Fund.

Trustee’s fee
Up to 0.1% per annum of the Net Asset Value of the Fund, subject to a monthly minimum of US$1,000.

Custodian fee
The Custodian Fee payable is subject to agreement between the Manager and the Custodian and may exceed 0.1% per annum depending on, amongst others, the size of the Fund and the number of transactions carried out.

B. NikkoAM-StraitsTrading Asia ex Japan REIT ETF

Currently, there are 24 REITs Asian REITs tracked in the fund holding at the time of writing. The ETF will benchmark itself by tracking the FTSE ERPA/NAREIT Asia ex-Japan Net Total Return REIT Index.

Annual fees per Product highlight sheet:

Management Fee Current:
0.50% per annum of the Deposited Property;
Maximum: 0.70% per annum of the Deposited Property.

Trustee Fee Current:
up to 0.04% per annum of the Deposited Property;
Maximum: 0.05% per annum of the Deposited Property.
Subject to a minimum fee of S$15,000 per annum.

Custodian fee:
The custodian fee payable is subject to agreement between the Manager and the Custodian and may amount to or exceed 0.10% per annum depending on, amongst others, the size of the Fund and the number of transactions carried out.

Administration fee Current:
0.04% per annum of the Deposited Property;
Maximum: 0.05% per annum of the Deposited Property.
Subject to a minimum fee of S$15,000 per annum

C. Lion-Phillip S-Reit ETF

This ETF tracks the 23 High-quality S-REITs, according to the number of S-REITs that constitutes the Morningstar® Singapore REIT Yield Focus IndexSM. This may, however, be changed by Morningstar Research Pte Ltd from time to time.

Annual fees per Product highlight sheet:

Manager’s fee
Currently 0.50% p.a of the Net Asset Value of the Fund.
Maximum 0.50% p.a of the Net Asset Value of the Fund.

Trustee’s fee
Up to 0.04% per annum of the Net Asset Value of the Fund, subject to a yearly minimum of S$15,000.

Custodian fee
The Custodian Fee payable is subject to agreement between the Manager and the Custodian and may exceed 0.10% of the Net Asset Value of the Fund depending on, amongst others, the size of the Fund and the number of transactions carried out.

General Benefits of ETFs

  • Low-cost Easy Access to REITs
  • Attractive and Stable Dividend Income
  • Sustainable Income Stream and Potential Capital Growth
  • Diversification of Portfolio Risk
  • Time savings over having to research what REITs to purchase

D. Reasons for buying REITs directly

You decide what works best for you based upon your own decision of the various REITs available in the market. There are tools like the SGX StockFacts where you can filter as well as various avenues such as Stock Market Reports from Bloomberg, brokerage firms and their platforms to search for quality REITs to buy into. The respective market stock exchanges like SGX, Bursa Malaysia, HKEx also provides information related to the respective REITs listed in each of the markets.

REITs for the following market: Singapore, Malaysia, Hong Kong

Annual fees:

Manager’s fee
There will be management fees paid to the REIT managers.

Trustee’s fee
There may also be trustee fees applicable as well.

Custodian fee
Only applicable for stocks purchased through the custodian with the brokerage. It is unlikely that there will be any custodian fees charged by any Central Depository.

General Benefits of Self management

  • Attractive and Stable Dividend Income
  • Sustainable Income Stream and Potential Capital Growth
  • Diversification of Portfolio Risk
  • Fewer fees payable
  • Autonomy over which REITs to buy and sell

In a Nutshell

Cost Breakdown of ETFs vs Direct Investing

 

Phillip SGX APAC Dividend Leaders REIT ETF NikkoAM-StraitsTrading Asia ex Japan REIT ETF Lion-Phillip S-Reit ETF Direct purchase of REITs
Number of REITS 30 24 23 1
Underlying REITs Listing in stock exchange Australia, Singapore, Malaysia Hong Kong, Malaysia, Singapore Singapore Depends on REIT invested
Manager’s fee 0.3% p.a. 0.5% p.a. 0.5% p.a. REIT dependent
Trustee’s fee 0.1% p.a. @ minimum US$1,000 p.m. 0.04% p.a @ min S$15,000 p.a. 0.04% p.a @ min S$15,000 p.a. REIT dependent
Custodian fee 0.1% p.a. min 0.1% p.a. min 0.1% p.a. Broker dependent
Remarks Excludes fees factored in at each individual REITs holdings Excludes fees factored in at each individual REITs holdings Excludes fees factored in at each individual REITs holdings *Dividend payouts for non Singapore listed REITs is subjected to origin country withholding tax law.

What will be worthwhile?

I would opt for direct investing into the REITs if I have access to the various markets and lesser of the trading and custodian fees if any. While, if I do not have the time to monitor or wish for diversity through ETFs I would consider one of the three depending on my personal risk appetite – for currency and the basket of REITs invested.

How to get started?

The individual counters and some of the ETFs may be purchased via the following methods.

1. Monthly Investment Program*

2. Direct investing through brokerage

*At the point of writing only Lion-Phillip S-REIT ETF is available for investment via the Phillip Share Builder program from Nov 2017.

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