REITs are a favorite investment among Singapore investors. What’s not to love, considering our affinity for real estate and the steady dividends REITs offer without the need to manage tenants?
Despite the interest rate hikes since 2022, which have impacted REIT stock prices, higher-quality REITs have managed to hold up better and continue to deliver solid dividends to their unit holders.
If you’re interested in investing in REITs but prefer not to stress over selecting individual REITs, there are two approaches you can consider: one is to invest in a REIT ETF, and the other is to consider Syfe REIT+.
Syfe REIT+ outperforms
Today, ETFs are gaining popularity as a convenient way to invest in a basket of securities at low costs. Most ETFs are passively managed, meaning they track an index without making their own investment decisions. Since they are traded on the stock exchange, investors can buy and sell them like stocks, avoiding the high fees associated with sales commissions to financial advisors, as is common with unit trusts.
For instance, an investor can purchase a basket of REITs through a REIT ETF like the CSOP iEdge S-REIT Leaders Index ETF for just 0.6% of the assets under management per year, which is lower than the typical unit trust management fee of over 1%.
However, with the advent of fintech, it’s now possible to access such passively managed investments directly, bypassing the ETF structure. This further simplifies the process and leads to additional cost savings.
Syfe, a comprehensive investment platform in Singapore, exemplifies this by working with SGX to build a portfolio of the 20 most well-known Singapore REITs. The selection focuses on REITs that are SGD-denominated, liquid, and backed by a decent market capitalization and reputable management teams. Some names include CapitaLand Integrated Commercial Trust, CapitaLand Ascendas REIT, Mapletree Logistics Trust, Mapletree Industrial Trust, and Frasers Logistics & Commercial Trust.
Syfe REIT+ has performed well, delivering higher returns than the REIT ETFs even after reducing the performance by the amount of fees.
| 2023 | 2022 | 2021 | 2020 | |
| SYFE REIT+ | ||||
| Syfe REIT+ (100% REITs) | 6.61% | -10.48% | 2.12% | -0.73% |
| Syfe REIT+ (Risk Managed) | 5.62% | -9.37% | -2.02% | 4.81% |
| BENCHMARK | ||||
| iEdge S-REIT Leaders Index | 5.65% | -11.57% | 2.75% | -0.94% |
| REIT ETFs | ||||
| CSOP iEdge S-REIT Leaders ETF | 4.53% | -12.28% | -0.30% | – |
| Lion-Phillip S-REIT ETF | 5.65% | -12.56% | 3.05% | -1.69% |
Syfe REIT+ is more cost effective
Besides its outperformance, Syfe REIT+ is more cost effective too. The fees range from 0.25% to 0.65%, depending on the amount invested with Syfe, with lower fees for higher invested amounts:
These are all-in fees with no additional charges for transactions or ETF expenses in the case of Syfe REIT+. However, for ETF investors, brokerage fees are charged on top of the annual ETF fees.
For example, Syfe also provides brokerage services, here we compare between the fees for investing in the ETF directly versus Syfe REIT+:
| Units | Cost | Brokerage Fee | % of investment | ETF Expense Ratio | Total Fees | |
| CSOP iEdge S-REIT Leaders Index ETF | 100 units | ~$750 | $1.98 | 0.26% | 0.6% | 0.86% |
| CSOP iEdge S-REIT Leaders Index ETF | 500 units | ~$3750 | $2.25 | 0.06% | 0.6% | 0.66% |
| Syfe REIT+ | $3750 | 0.65% | ||||
Investing in 100 units of the CSOP iEdge S-REIT Leaders Index ETF would incur a fee of around 0.86%, while a $3,750 investment in the same ETF reduces the total cost of owning the ETF to 0.66%, which is still 0.1% higher than Syfe REIT+ fees. In addition, Syfe’s brokerage fees are significantly less compared to traditional brokers, making Syfe REIT+ an even more attractive option.
How are dividends managed
One of the key value propositions of REITs is their generous dividends, making it crucial for Syfe REIT+ investors to understand the options regarding dividend management.
By default, dividends from the REIT+ portfolio are automatically reinvested. This means dividends are accumulated and used to purchase more REITs once they reach a level that is economically viable. Investments are made according to the prevailing weightage of the iEdge S-REIT Leaders Index, potentially generating more dividends in the future as your ownership of REIT units increases. This process exemplifies the compounding effect and this feature is not available if you buy your own REIT ETF.
If you prefer to receive your dividends in cash, this option is available as well, but it requires a minimum investment of S$5,000 in Syfe REIT+. Once this threshold is met, you can opt to receive dividends as quarterly payouts to your designated bank account.
REITs with Risk Management
For investors seeking a more conservative approach, Syfe offers a ‘REITs with Risk Management’ portfolio. This option still tracks the iEdge S-REIT Leaders Index but introduces a twist by allocating a portion of the investment to the ABF Singapore Bond Index Fund, a bond ETF that invests in Singapore government bonds. The inclusion of the government bond ETF aims to reduce the overall portfolio’s volatility. However, it’s important to note that the returns are expected to be lower compared to the REIT+ (100% REITs) portfolio, given that the bond ETF’s total returns are typically less than those of REITs.
While investors have the option to purchase both REIT and bond ETFs independently, opting for Syfe’s integrated approach simplifies the process. Syfe’s allocation is dynamic, potentially increasing the investment in REITs when market conditions are deemed favorable. This flexibility in allocation means Syfe manages the rebalancing, sparing investors from transaction fees that would be incurred if they were to manage rebalancing themselves. The ‘REITs with Risk Management’ portfolio is an optional solution tailored for those who prefer a portfolio with lower volatility.
Below is a summary of the differences between Syfe REIT+ and REIT ETFs:
Syfe as a comprehensive investment platform
Technology has revolutionized investing, granting access to a wealth of information and significantly reducing the cost of investing. Syfe has embraced this evolution and further leveraged technology to create a platform that offers a comprehensive suite of investment solutions.
Syfe REIT+ represents just one facet of the array of managed portfolios Syfe offers. Investors have the flexibility to select from portfolios comprising varying exposure to stocks and bonds, or even thematic ETFs tailored to capture specific market trends. Furthermore, conservative investors might prefer income portfolios designed to generate steady income from bonds, catering to a wide range of investment preferences and risk tolerances.
Additionally, Syfe broadens its array of services with a brokerage account, facilitating the purchase and sale of individual stocks and ETFs within the same account. Cash management accounts are available too, providing an opportunity to accrue higher interest of up to 5.35% p.a. on cash through money market funds.
Syfe’s diverse range of services ensures there is something suitable for every investor.
Syfe is offering a promotion for you:
- Enjoy 3 months of fee waivers on Syfe’s Managed Portfolios and up to S$100 cash credits on US trades when you start investing with Syfe Brokerage. Terms and conditions apply.
- Eligibility: New to Syfe clients who have never registered or funded before
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Do check it out and here’s the link to sign up:
This article has been sponsored by Syfe, with the views expressed herein being those of the author. This advertisement has not been reviewed by the Monetary Authority of Singapore.