At ProsperUs, we’ve always talked about the benefits of investors using exchange-traded funds (ETFs). That’s because there are many benefits to buying ETFs.
Both new investors and experienced investors alike can benefit from ETFs in their investment portfolio.
But that’s particularly true of new investors who are just starting their journey, given it offers up instant diversification at extremely low cost.
In Singapore, options open to investors include both REIT ETFs and an ETF for the main benchmark – the Straits Times Index (STI).
Yet even with a REIT ETF in Singapore, you’re more often than not exposed primarily to the Singapore market.
There’s no truly global REIT offering listed in Singapore, despite the US being the largest real estate market in the world.
So, here’s one global REIT ETF that investors – looking for worldwide exposure – can buy and hold forever.
iShares Global REIT ETF: Buying into global property
Financial services giant BlackRock Inc (NYSE: BLK) has become a household name due to the sheer size of its ETF offerings via its “iShares” ETFs brand.
And it’s the iShares Global REIT ETF (NYSE: REET) which has become to “go-to” ETF if investors want exposure to global REITs.
Why’s this the case? Well, first off it has a large total assets under management (AUM) figure of US$3.2 billion. That gives investors a greater level of liquidity and tighter bid-ask spreads when buying or selling.
Compare that to Singapore’s biggest listed REIT ETF – the NikkoAM-StraitsTrading Asia Ex Japan REIT ETF (SGX: CFA) – which only has an AUM of S$378 million (US$288 million).
The iShares Global REIT ETF is also well-diversified, with 349 individual holdings within it. The top 10 holdings combined (31%) make up under one-third of the overall ETF in terms of exposure.
Cheap and diverse REIT exposure
In terms of geographical exposure, Singapore investors will probably appreciate the fact (especially if they already own S-REITs) that the iShares Global REIT ETF has a 70% exposure to US-listed REITs.
Far behind in second spot is Japan (7.2%), while the UK (4.4%), Australia (4.2%), and Singapore (3.4%) round out the top five.
Switching to the sub-sector REIT exposure, retail REITs, industrial REITs, and specialised REITs make up the top three (see below).
Source: iShares Global REIT ETF product page
When you see the term “specialised REITs” these refer to those REITs focused on data centres, such as Equinix Inc (NASDAQ: EQIX) and Digital Realty Trust Inc (NYSE: DLR).
However, one of the most attractive aspects of the REIT ETF is its low expense ratio, which comes in at just 0.14%.
That’s a veritable bargain when compared to other specialised or thematic ETFs. For example, the Global X Cybersecurity ETF (NASDAQ: BUG), which focuses on cybersecurity companies, has an annual expense ratio of 0.5%.
Most thematic ETFs have expense ratios ranging from 0.4% to 0.8%. Even the five REIT ETFs listed in Singapore have annual expense ratios ranging from 0.6% to 1.1%.
So, for investors to gain exposure to global REITs at just 0.14%, it’s certainly a good deal.
The iShares Global REIT ETF pays out a distribution quarterly and is currently offering a 12-month trailing dividend yield of 2.4%.
Think about broadening REIT horizons
Just like how we buy stocks of overseas companies, we should also consider the REIT universe outside of Singapore.
That’s because the US is the largest REIT market in the world, by quite some stretch. Yet other REIT markets like Japan, the UK, and Hong Kong also have solid names within them.
By buying into the iShares Global REIT ETF, REIT investors will have a diversified and low-cost way to tap into some of the world’s biggest REITs that you can hold forever.
Disclaimer: ProsperUs Head of Content & Investment Lead Tim Phillips doesn’t own shares of any companies mentioned.
