2 Best Singapore REIT ETFs to Buy and Hold Forever

Best Singapore REIT ETF

Tim Phillips

February 28, 2022

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In stock markets, the war in Ukraine is dominating the headlines. But amid volatility, long-term investors should always be thinking about where stock prices will be in five or 10 years, and not just next month.

In Singapore, investors have a wide variety of real estate investment trusts (REITs) on offer that they can buy. REITs here also happen to be very popular with dividend investors, for good reason.

However, how do you know which particular REITs have the best prospects? One way to avoid having to “pick” stocks (as well as REITs) is to invest by buying an exchange-traded fund (ETF).

As my colleague Billy has outlined previously in our ongoing ETF series, these investment vehicles offer many benefits to investors – both for beginners and experts alike.

Singapore’s stock market provides a reasonable choice of Singapore REIT ETFs, so investors don’t need to buy specific REITs if they don’t want to.

With that, here are two of the best Singapore-listed REIT ETFs that long-term investors can buy and hold forever.

1. Lion-Phillip S-REIT ETF

The first REIT ETF on the list is Lion-Phillip S-REIT ETF (SGX: CLR), which listed on the local Singapore bourse in October 2017.

While it’s 100%-focused on Singapore-listed REITs, it does have diversity by both geography and property sector given the global nature of Singapore REITs.

The REIT ETF has a total expense ratio (which is a better reflection of the fund’s total expenses versus just the management fee) of 0.6% and holds around 28 REITs.

Its biggest holdings include your household REIT names in Singapore, with the top three REITs – as of 31 December 2021 – being Keppel DC REIT (SGX: AJBU), at a 9.9% weighting, CapitaLand Integrated Commercial Trust (SGX: C38U), at a 9.8% weighting, and Mapletree Industrial Trust (SGX: ME8U), at a 9.5% weighting.

Just over one-third of the ETF is in industrial REITs while another third is in retail REITs. The rest of the REITs are made up of various sub-sectors including Healthcare, Office, Diversified and Specialised (see below).

Lion-Phillip S-REIT ETF breakdown

Source: Lion Global Investors/Morningstar as of 31 December 2021

The REIT ETF’s benchmark is the Morningstar Singapore REIT Yield Focus Index. Since inception, it has delivered a respectable annualised total return (with dividends reinvested) of 6.2%.

Investors should remember that this REIT ETF holds REITs that are only listed in Singapore.

2. NikkoAM-Straits Trading Asia ex Japan REIT ETF

Second on the list is the first REIT ETF to be listed in Singapore; NikkoAM-StraitsTrading Asia ex Japan ETF (SGX: CFA).

Launched in March 2017, it’s the largest REIT ETF with a fund size of close to S$340 million. Yet, in contrats to the Lion-Phillip S-REIT ETF, this one has more exposure to Asia Pacific REITs – as the name suggests.

The top holding in the ETF is Hong Kong-listed giant Link Real Estate Investment Trust (SEHK: 823), with a 10.2% weighting (as of 31 January 2022). It is the largest listed REIT in Asia Pacific (by market cap).

Second and third spot, by weightings, are Singapore-listed CapitaLand Integrated Commercial Trust (with 9.9%) and industrial-focused Ascendas Real Estate Investment Trust (SGX: A17U), with a 9.7% weighting.

It also has exposure to specialty REITs in up-and-coming markets, such as India’s first listed REIT, Embassy Office Parks REIT (BOM: 542602), which is a large owner of office parks and commercial buildings in key Indian cities such as Mumbai and Pune.

The REIT ETF’s total expense ratio is the same as Lion-Phillip’s at 0.6%. The ETF holds over 40 REITs and differs from the Lion-Phillip ETF mainly via exposures, with the NikkoAM ETF having more exposure to the office and retail sub-sectors.

As a result, its annualised total returns, with dividends reinvested, of 5% since inception (they both listed in 2017) are slightly worse than the Lion-Phillip REIT ETF.

Investing no matter what the market does

One of the key factors that determines investors’ long-term returns is “time in the market”. To this extent, it’s important for investors to focus on staying invested – through thick and thin.

Clearly, right now there is downward pressure on markets, but REITs are investments in physical real estate assets that produce regular tax-free income streams.

Continuing to invest (amid volatility) by buying ETFs is one way that investors in Singapore can gain exposure to the biggest REITs while also sustainably growing their wealth over the long term.

Disclaimer: ProsperUs Head of Content & Investment Lead Tim Phillips owns shares of Mapletree Industrial Trust.

About the Author: Tim Phillips

Tim, based in Singapore but from Hong Kong, caught the investing bug as a teenager and is a passionate advocate of responsible long-term investing as a great way to build wealth. He has worked in various content roles at Schroders and the Motley Fool, with a focus on Asian stocks, but believes in buying great businesses – wherever they may be. He is also a certified SGX Academy Trainer. In his spare time, Tim enjoys running after his two young sons, playing football and practicing yoga.