Sunday, April 21, 2019

The Gold Silver Ratio

The gold silver ratio (GSR for short) is the number of ounces (oz) of silver required to buy one ounce of gold (i.e. price of 1 oz silver / price of 1 oz gold). It is used by gold and silver traders to determine when to buy or sell the two precious metals. 

Unlike most other ratios where there is a generally accepted number or a range of numbers, the GSR has none. One oft-quoted number is 17.5, which is the amount of silver to gold in the Earth’s surface. However, based on the last 30 years or so, the ratio did not even hit that number, and the lowest was back in 2011 where the GSR was slightly above 301.

Though these two are precious metals and have a high positive correlation with each other (0.79 between 2007 and 20182), the GSR swung wildly between the 30s and 80s during the said period, and as of now it is about 80-plus3.

Gold and silver are two of the three assets for the commodities component in The Bedokian Portfolio4. If your portfolio has only gold or silver, then you can take this article as knowledge. If you have both, then read on.

Gold And Silver Are The Same, Yet Different

Chemically, gold and silver belongs to group 11 in the periodic table of elements, along with copper, meaning they have similar properties such as good electrical conductivity and are used for coinage. Their current usage, however, differs with each other. Silver is used more in industrial applications, such as electronics and photography, while gold, though there are some industrial uses for it, is mostly used for jewellery and for investment purposes.

From a portfolio viewpoint, looking at both, you can say that they are akin to sectors within the equities asset class. Just like financials and consumer staples, they could be positively correlated but both can be up and down separately for certain periods of time.

GSR As A Rebalancing Tool

We know that rebalancing involves selling the overpriced and buying the underpriced to balance our portfolio back to its asset class allocation. Likewise, we can make use of GSR as a rebalancing tool for gold and silver within the commodities portion. The tricky part is what would be the “magic number”, which unfortunately there isn’t any.

If you have some trading background, you could employ technical charting such as trends and signals. However, for the not-so technically inclined (like myself), you could use a moving annual average of past GSRs, something like how I would do it for the indices in my 10-30 Rule in my ebook5.

Let’s say I want to use a 3-year moving annual average, so I would take the GSR at the beginning and ending of 2016, and get an average value for that year. I repeat for the years 2017 and 2018, and then I will average these three numbers to get the final average number, and that will be my “magic GSR number” for 2019. When 2020 comes, I will get the 2019 figure and average it together with 2017’s and 2018’s, and I have another new “magic GSR number”. 

This is just one method. You can choose any number of years for your moving annual average, and/or you can choose to obtain the GSR from different points within a year instead of twice, like three times for the case of half-yearly (1 Jan, 30 Jun and 31 Dec) or five times for quarterly (1 Jan, 31 Mar, 30 Jun, 30 Sep and 31 Dec). Furthermore, instead of one number, you can have a tolerance range (e.g. plus 10, minus 10).

You may be wondering, “I already have a 50-50 allocation of gold and silver in my commodities. I could just rebalance according to these fixed percentages. Do I still need GSR to guide me?”

And my answer is: it is up to you.

Cheers!


1, 3 – Goldprice. Gold/Silver. https://goldprice.org/gold-silver-ratio.html  (accessed 20 Apr 2019)

2 – Portfolio Visualizer. Annual returns correlation between GLD and SLV ETFs, 1 Jan 2007 to 31 Dec 2018. https://www.portfoliovisualizer.com/asset-correlations?s=y&symbols=GLD%2C+SLV&endDate=04%2F20%2F2019&timePeriod=4&numTradingDays=60 (accessed 20 Apr 2019)

4 – The Bedokian Portfolio, p36

5 – ibid, p119-120


Saturday, April 6, 2019

It’s That Season Again

SPH REIT had just declared their 2Q2019 results and dividends. For REIT investors, SPH REIT’s announcement marks the beginning of the so-called REIT CD (cum dividend) season, where in the next few weeks, we will see most of the S-REITs publish their finances and distributions for their quarter.

For dividend investors like myself, this period is “full-of-win” as you will know how much you are getting from your REIT portfolio. If you are carrying out the Bedokian Portfolio investment approach, the distributions received will be parked at the cash portion, ready for deployment into whichever asset class in the next rebalancing moment.

At the same time however, you will also need to review the REITs’ results for the quarter and comparing them with past performances. 

The numbers that you used months or years ago in selecting a REIT to invest may have changed today, such as the net asset value (NAV), weighted average lease expiry, gearing, etc. For SPH REIT’s case1, between 31 Aug 2018 and 28 Feb 2019, the NAV had changed from SGD 0.95 to SGD 0.94, and the gearing had increased from 26.3% to 30.1%.

Then again, numbers do not form the whole picture, and a holistic approach is required when conducting fundamental analysis. If you are vested in this REIT and if time permits, you can have a relook and then decide if you want to hold, sell or add more of it.

In the meantime, keep calm and collect dividends.


1 – SPH REIT. Financial Statements And Related Announcement: Half Yearly Results. 5 Apr 2019. http://sphreit.listedcompany.com/news.html/id/711266 (accessed 6 Apr 2019).

Friday, March 22, 2019

The SIA 3.03% Bond: The Bedokian’s Take

Another corporate bond is coming to town, and yes, it is the Singapore Airlines (SIA) 3.03% bonds. A few financial blogs had articles on it, so I shall just concentrate my post from a Bedokian Portfolio investor’s point of view.

Let us run through this bond using my conservative selection guidelines stated in my ebook1:

  • Bond is priced at par or discount: If you are applying for the bond at this stage and got it, it is considered as getting it at par (well almost. There is this $2 application fee which makes it slightly above par, but we will just let it be).
  • At least five years to bond maturity date: Pass, since the bond tenure is exactly five years.
  • Credit rating of “investment grade”: This is the gripe. According to the product highlights sheet2, it was stated that the issuer (i.e. SIA) and the bonds are not rated by any credit agency. We shall look at this later.


In conjunction with the selection guidelines, we still need to conduct a full fundamental analysis (FA), using the Bedokian Portfolio’s three-level FA approach, on SIA. However, we shall only highlight some of the important points from our own analysis as well as from other sources.

Company Level

First up we will look at SIA from an equity investor’s perspective. Key indicators pertaining to bonds (a.k.a. debts) will be the debt-to-equity (D/E) and current ratios, which are (from Yahoo Finance)is 40.03 and 0.5 respectively. Going by The Bedokian Portfolio’s equity selection guidelines4, that is not so good.

SIA, being in the airline industry, having a high D/E is the norm due to the capital-intensive nature (in fact, the issuance of these bonds are meant for the purchase of aircraft and aircraft related payments5). In the case of having high leverage, a strong cash flow is very important for the company.

Kyith from Investment Moats had detailed SIA’s financial information and cash flow, and concluded: Their financial position looks strong enough to pay the coupon payment”. He also highlighted that the non-current liabilities were mostly past bond issues and very little bank loans6.

Environmental Factors Level

The airline industry is very competitive and price-sensitive, period. A rise in air ticket prices will send customers to another airline that offers lower ones, ceteris paribus. This means for an airline that is not so cheap, it has to offer some other value-added services or experiences, which in other words, qualitative advantages.

SIA got the world’s best airline title, as well as best first class, best first class airline seat and best airline in Asia, as ranked by research firm Skytrax in the priod Aug 2017 to May 20187. Such awards are important as SIA can be seen as a premium in terms of quality, thus it may appeal to customers who does not only see price in choosing an airline. 

Still, SIA has an answer to price-only customers, in the form of their subsidiary Scoot.

Economic Conditions Level

Air travel has become part and parcel of travellers wanting to go overseas, or to go from one part to another part in a large country efficiently.  The same goes to air freight and the transportation of cargo and goods.

During an economic downturn, demand for discretionary travel and goods tend to fall as consumers would want to ride out the storm and save, thus there is some positive correlation between airlines and the state of the economy. To prove this point, the annual growth rate in global air traffic passenger fell from 7.9% to 2.4%, and then to -1.2%, in the years 2007, 2008 and 2009 respectively, the latter two being the Global Financial Crisis years8.

No Ratings and Not Secured

I guessed I may have got carried away with my FA. Now back to the bond. Remember that this bond is not rated? Then there is only one other thing that you have to rely on, and that is faith.

On another related note, the product highlights sheet mentioned that the bonds are not secured9, meaning the bonds are not tied to any collateral except for the good faith of the company. Hence in the event of SIA’s winding up before the bonds mature:

“…the Bondholders will not have recourse to any specific assets of the Issuer and its subsidiaries and/or associated companies (if any) as security for outstanding payment or other obligations under the Bonds and/or Coupons owed to the Bondholders and there can be no assurance that there would be sufficient value in the assets of the Issuer after meeting all claims ranking ahead of the Bonds, to discharge all outstanding payment and other obligations under the Bonds and/or Coupons owed to the Bondholders.” 

Sounds morbid? Well in any investment, we have to consider all risks, and this will depend on how you view those risks. It is up to you how to judge the probability of those risks.

Judging from the past performance (though it is not an indicator of future returns), SIA had returned positive net profits and good cash flow, so in my opinion, the “no-ratings” and the unsecured bond issues would be on a low.

The Coupon Rate

At 3.03%, this coupon rate is considered low among corporate bonds. Taking a 5-year Singapore Government bond that was issued recently on 1 Feb 2019 (at 2% coupon rate, which I use it as the risk-free rate) for comparison10, the risk premium is 1.03% (3.03% – 2.00% = 1.03%). Meaning for that extra 1.03%, assuming holding the bonds till maturity, you will have to worry whatever bad points that were said in the above sections. 

Seedly had compared the coupon rate with other investment instruments with different tenures, like CPF, fixed deposit rates, etc11.

Finally, The Bedokian’s Take

And the anti-climatic answer is: it boils down on the individual’s comfort level and risk tolerance. If you are interested, do remember that diversification is paramount in an investment portfolio, and adhere to the 12% limit rule.

You have until 26 Mar 2019, 12:00 pm to decide, so take this weekend to have a thought-out.


1 – The Bedokian Portfolio, p100-101

2, 5, 9 – Product Highlights Sheet. 19 Mar 2019. https://www.singaporeair.com/saar5/pdf/Investor-Relations/SIA-Retail-Bond/product-highlights-sheet-19March2019.pdf (accessed 22 Mar 2019)

3 – Singapore Airlines Limited. Yahoo Finance. https://sg.finance.yahoo.com/quote/C6L.SI/key-statistics?p=C6L.SI (accessed 22 Mar 2019)

4 – The Bedokian Portfolio, p96-97

6 – Singapore Airlines SIA issues a Safe 5 Year 3.03% Retail Bond – My Take. Investment Moats. 19 Mar 2019. http://investmentmoats.com/money/singapore-airlines-sia-5-year-3-03-retail-bond/ (accessed 22 Mar 2019)

7 – Kaur, Karamjit. SIA bags world’s best airline title. The Straits Times. 18 Jul 2018. https://www.straitstimes.com/singapore/transport/sia-bags-worlds-best-airline-title (accessed 22 Mar 2019)

8 – Statista. Annual growth in global air traffic passenger demand from 2006 to 2019. https://www.statista.com/statistics/193533/growth-of-global-air-traffic-passenger-demand/ (accessed 22 Mar 2019)

10 - The Monetary Authority of Singapore. Results of auction of taxable book-entry Singapore Government Bonds to be issued on 01 February 2019. 29 Jan 2019. http://www.sgs.gov.sg/~/media/SGS/SGS%20Announcements%20pdf/Bonds%20PDF/2019/N519100A%20Result.pdf (accessed 22 Mar 2019)

11 – Tan, Cherie. SIA Retail Bond 2019 – The Good, The Bad and Everything You Should Know. Seedly. 21 Mar 2019. https://blog.seedly.sg/sia-retail-bond-everything-you-should-know/ (accessed 22 Mar 2019)

Sunday, March 17, 2019

The Rise of The Tech Conglomerates

The moment we see the word “conglomerate”, we began to associate it with companies that have multiple business divisions doing all sorts of stuff. General Electric, Siemens and Keppel are some examples of conglomerates. Most of these known conglomerates have a very long history. Jardine Matheson started off in the 1830s as a trading company in the Far East; Philips was founded in the late 19th century manufacturing lamps. 

Over the years the name of these companies became great intangible assets. Think “Mitsubishi” and the things that pop out of our heads will be cars, air conditioners and the WW2 Zero fighter planes. Or when we talk about Samsung, smart phones, televisions and shipbuilding will come to mind.

While these conglomerates took a long time to become what they are now (so-called traditional), there is a new breed coming up fast and hard, and from a sector that we did not expect it; technology. Recently we are seeing some tech firms rapidly becoming conglomerates, doing (or about to do) things that are not what they were in their beginnings.

Amazon came about as an online bookstore in 1995, but now they have become a huge e-commerce powerhouse and ventured into traditional sectors such as supermarkets (through their acquisition of Whole Foods). Grab originated as a taxi-hailing app in 2012. Today, besides being a ride-hailing company, Grab also has a food delivery network, a payment platform and is about to offer loans to companies1. What are the main factors for their rapid rise to conglomerate status as compared to their traditional counterparts? Three reasons: platform, data and network, and they work in synergy with one another.

Reason #1: Platform

A platform (in my definition for tech) is an integrated system that encompasses backend processes, front-end interface by consumers and any supporting components in between that make it work. The key attributes of the platform are that it should be scalable and adaptable to suit different situations and business needs.

Apple’s platform (or ecosystem as most called it) allows seamless integration between one’s computer, mobile device, entertainment and even exercise regime. The Grab app now includes looking for a ride, topping up your electronic wallet and scan QR codes to pay for your purchases (and earn some points). 

Reason #2: Data

In the 21st century, data is the new gold. Why is this so? Sieving through data carefully, you will get information. Digesting that information, you will gain useful knowledge. Now you know why data analytics is so “in” now.

Tech firms, through their platforms, have amassed tons of data from consumers. With this and through data analytics, they can roughly estimate the “5 Ws and 1 H” (what, where, when, why, who and how) of customers. With these outcomes, they could provide new products and services, and/or improve on existing ones.

Amazon, by using data collected from customers buying from its website, would further recommend products that they think the customers may be interested in.

Reason #3: Network

“Network” here means a slew of things, ranging from collaboration with other firms to the outright buyover of companies. Big businesses, both traditional and technological, carry out the “networking” to venture into a new sector and/or to gain some product, service and/or expertise to synergise with their operations.

The earlier cited example of Amazon buying over Whole Foods is one aspect of “network”. In 2002, eBay acquired PayPal to better integrate the latter’s online payment service to the former’s e-commerce operations.

So What Do All These Mean?

As an investor, these things present opportunities for your investment portfolio, although I must say it is not so simple as it seems. Admittedly I did not foresee Grab’s move into the online payment sphere, even though I had mentioned that payment solutions are trending in the days to come. Though I had written on looking for the next big thing, these only provide some partial guesstimates and half-baked clairvoyance into the future.

Then on the political front we have an American politician wanting to break up big technology companies. Just a few days ago, Elizabeth Warren, a senator who may be running for the United States Presidential Elections next year, was quoted in an interview2:

"Amazon operates this platform. That's cool. I'm for that. But Amazon does a second thing. They suck up information from every single transaction — information about buyer, information about the seller. And they then can use that information to make a decision to enter the marketplace themselves."

And this was directed at Reason #2 above.

In the meantime, disruptions are still ongoing, and who knows we may see a “network” between traditional and technological conglomerates working together.


1 – Cheng Wei, Aw. Grab offers firms loans of up to $100,000. The Straits Times. 14 Mar 2019. https://www.straitstimes.com/business/grab-offers-firms-loans-of-up-to-100000 (accessed 17 Mar 2019)

2 – Taylor, Jessica. Sen. Elizabeth Warren Blasts Big Tech, Advocates Taxing Rich In 2020 Race. www.npr.org. 15 Mar 2019. https://www.npr.org/2019/03/15/702707734/sen-elizabeth-warren-takes-longtime-fight-for-a-level-playing-field-to-2020-race (accessed 17 Mar 2019)

Monday, March 4, 2019

Which Bedokian Portfolio Combination Is Suitable For You?

In my eBook I had touched on three different Bedokian Portfolio variations1, each broadly suited for investors of different age groups and/or risk profiles. Let us revisit what are the three:

  • Young investor aged 21-35 / Aggressive investor: 40% equities, 40% REITs, 10% bonds, 5% commodities, 5% cash (we call this Portfolio 1).
  • Middle-aged investor aged 36-55 / Moderate investor: 35% equities, 35% REITs, 20% bonds, 5% commodities, 5% cash (also known as the balanced Bedokian Portfolio, which I use most of the time as an example)(Portfolio 2).
  • Retiree investor aged 56 and above / Conservative investor: 20% equities, 20% REITs, 40% bonds, 10% commodities, 10% cash (Portfolio 3).


What would be the performance of these three portfolio combinations? Using U.S. market data from the Portfolio Visualizer (www.portfoliovisualizer.com), let us assume a U.S. Bedokian Portfolio investor with an initial amount of USD 10,000 and does annual rebalancing. Since the site’s earliest data on REITs was from 1994, we shall use the period of 1994-2018, a 25-year span. We will also include the S&P500 ETF as a benchmark, since this roughly represents the U.S. equity market as a whole.  


Fig.1 – Portfolio returns, table view, 1994-2018. Inflation is not factored in.


Fig.2 – Portfolio returns, graphical view, 1994-2018. Inflation is not factored in.

Let Us Compare

Looking at the whole thing, it is no doubt that investing in the S&P500 for 25 years will trump every Bedokian Portfolio combination out there, even the most aggressive one (Portfolio 1). Yes, the results are there and I do not dispute it. However, this just highlights the fallacy that most investors would tend to fall for, and that is looking at just the returns.

If we run a similar test, but making 2009 as the end year, the results would be vastly different:


Fig.3 – Portfolio returns, table view, 1994-2009. Inflation is not factored in.


Fig.4 – Portfolio returns, graphical view, 1994-2009. Inflation is not factored in.

And in 2009, naturally the returns-only investor would proclaim that the aggressive Bedokian Portfolio was the best.

Returns are very subjective and will change from time to time, depending on what you are invested in and when you are looking at your investments. A well-known way to have good returns all of the time would be tactical asset allocation, where you adjust the weightage of the asset classes, sectors and/or individual companies to capture the best returns. Problem is, this meant a very sound grasp of what is coming, and I can say not even the best investor or fund manager can do it 100% of the time.

Risk And Returns

There are two ‘Rs’ in investing, one is returns and the other is risk, specifically market risk. These two attributes form the very basic premise of the Modern Portfolio Theory (MPT), where investors build portfolios to optimize returns based on a given level of risk, and it also advocates the advantages of diversification.

There are a few ways to measure risk. One is to use standard deviation, which measures the past volatility of an asset class or security. The higher the standard deviation, the more volatile the asset class/security is (and thus, more risky). Another is the Sharpe ratio, where it is the measure of the excess returns above the risk-free rate over the standard deviation. The higher the Sharpe ratio, the better it is.

Lastly we have the Sortino ratio, which is similar to the Sharpe ratio, but it uses only the downside standard deviation instead. Like the Sharpe ratio, the higher the Sortino ratio, the better it is.

Let Us Compare Again

Reevaluating the numbers in Fig.1 and Fig.3, taking risk and returns in mind, Portfolio 3 stood out as the best with a lower standard deviation, and higher Sharpe and Sortino ratios. This concludes the suitability of Portfolio 3 for the conservative and/or retiree Bedokian Portfolio investor.

The results also highlight a common adage in investing; higher returns typically require higher risks. In Fig.1, the S&P500 ETF gave the highest returns, but also the highest risk based on the three risk measurements. But in Fig.3, Portfolios 1 and 2 gave the higher returns with lower risk than the S&P500 ETF (hence my bold on the word ‘typically’). This reinforces the importance of diversification at the asset class level, where risk is tapered and correlation may bring higher positive returns and lower losses.

Still, I acknowledge every person’s personality and characteristics are different, and so is the respective person’s risk appetite and investment style. The usual disclaimer applies and of course, the phrase: "past performance does not indicate future returns".


1 – The Bedokian Portfolio, p72.

Assumptions on Portfolio Visualizer Data

Asset class representations used in the data: Equities = U.S. Stock Market; Bonds = Total U.S. Bond Market; REITs = REIT, Commodities = Gold; Cash = 1-month Treasury Bills. All dividends are reinvested and transaction costs (e.g. commissions) are not included.

Results

To see the results in its entirety for the 1994-2018 period in Portfolio Visualizer, click here.

To see the results in its entirety for the 1994-2009 period in Portfolio Visualizer, click here.

References

Standard Deviation – https://www.investopedia.com/terms/s/standarddeviation.asp

Sharpe Ratio – https://www.investopedia.com/terms/s/sharperatio.asp

Sortino Ratio – https://www.investopedia.com/terms/s/sortinoratio.asp

Sunday, February 24, 2019

MacBooks and Starbucks

I had mentioned about MacBooks and Starbucks in a one-liner here.  How this came about was my tendency to count the number of Apple MacBook users whenever I visited a Starbucks store. Out of 10 visits, on seven occasions I would see that MacBook users form the majority (>50%) of all laptops.

I posed this phenomenon to a few of my friends and colleagues, and one of them gave me a very interesting answer; MacBook users tend to be young adults, and Starbucks is considered a hipster joint, so these two things compliment each other. Short of carrying out a nationwide (or global wide) survey and research, from a presumptive point of view, it kind of makes sense.

So is there a positive correlation between MacBooks and Starbucks?

Good thing that the two companies, Apple and Starbucks, are publicly listed, so I can find out their market correlation using the Portfolio Visualizer (www.portfoliovisualizer.com). I will take the period of January 1993 to December 2018 for calculating the correlation, since Starbucks was listed somewhere in 1992, and the first MacBook (called the PowerBook) was released in 1991, to give a fair comparison.

Based on annual returns, the correlation is 0.161. While this number is positive, it is positive on the low end, and usually we see this correlation score between distinct asset classes.

So, does this mean my observations are wrong?

Short answer is, it depends.

It Depends #1

Both companies are in different businesses. Apple is in technology while Starbucks is in food and beverage. Also, in 2018 Mac computers (comprising of Mac desktops and MacBooks) formed only 8.9% of Apple’s total revenue2, as compared to Starbucks whose primary product is coffee. These reasons could explain why the correlation is low between them.

It Depends #2

On another note, my observation settings may be skewed. It is not wrong to look purely at MacBooks in Starbucks, since I am comparing these two variables. To make it more complete, we could see if MacBook users form the majority in other cafes or outlets that serve local coffee, or we could find out if MacBook users are at other non-café places such as fast food restaurants or the library.

It Depends #3

Back to the numbers game, we go by the law of averages and assumptions, and find out some interesting statistics. Assuming:

  • Average Lifespan of An Apple Device: 4 years3
  • Number of Macs sold between 2015 and 2018 (to fulfill the above 4 years): 76.53 million4
  • Assumed number of Macs sold that are MacBooks: 76.53 x 49.11%= 37.58 million
  • Total number of Starbucks outlets: 29,3246


If all MacBook users gather at Starbucks at the same time, there would be 37.58 million / 29,324 = approximately 1,281 per outlet!

Thus to form a majority, you would need 1,280 people or less using non-Mac laptops within each Starbucks. This is just “wow”. Of course, the last answer was given in a hypothetical situation which, in all probability, near to impossible to realize.  

What I had gone through above is a very simple exercise in fact finding based on figures and observations, which I could classify them as quantitative and qualitative data, respectively. 

So why am I mentioning this?

Simple. It is a way of doing fundamental analysis (FA).

You will encounter these two types of data when you conduct your FA; facts and opinions in the news, financial statements and management messages in annual reports, etc. Quantitative data is difficult to refute (aside from “figures fudging”) as they are past or “as at” data. Qualitative data is a bit on blurred grounds because it is obtained by non-quantified methods, such as observations, trend spotting and opinions. Biases from different individuals’ personalities and experiences could also play a part in qualitative analysis.

Contradicting as it may sound, we need both quantitative and qualitative data and information in order to give a more rounded picture in FA. I have always said that guesstimates (or calculated guesses) are better than pure wild-stab-in-the-dark guesswork, and these can be used for further analysis.

Sounds like hard work? Maybe for the first few times, but once you get the hang of it, it is easier. While you are at it, go grab a cup of coffee and enjoy it at the same time.



2 – Statista. The Mac’s Waning Relevance to Apple. https://www.statista.com/chart/8817/mac-sales-as-a-percentage-of-apples-revenue/ (accessed 23 Feb 2019)

3 – MacRumors. Average Apple Device Lifespan Estimated at Just Over Four Years by Analyst. https://www.macrumors.com/2018/03/02/average-apple-device-lifespan/ (accessed 24 Feb 2019)

4 – Statista. Global Apple Mac sales in the fiscal years from 2002 to 2018 (in million units). https://www.statista.com/statistics/276308/global-apple-mac-sales-since-fiscal-year-2002/(accessed 23 Feb 2019)

5 – GlobalStat StatCounter. Desktop vs Mobile vs Tablet Market Share Worldwide. Jan 2018 – Jan 2019. http://gs.statcounter.com/platform-market-share/desktop-mobile-tablet(accessed 24 Feb 2019)

6 – Statista. Number of Starbucks locations worldwide 2003-2018. https://www.statista.com/statistics/266465/number-of-starbucks-stores-worldwide/ (accessed 23 Feb 2019)

Saturday, February 9, 2019

Revisiting The Three REIT ETFs

A while ago, I had written about the three locally listed REIT ETFs here, so this post is some sort of a follow-up. To recap, the three REIT ETFs are the (my short form in brackets) Philip SGX APAC Dividend Leaders REIT ETF (Philip APAC), the NikkoAM-Straits Trading Asia ex Japan REIT ETF (Nikko-Straits Trading) and the Lion-Philip S-REIT ETF (Lion-Philip).

For this blog post, we shall see what would be the weightage of individual REITs and the sectors if we decide to buy all of the REIT ETFs, in equal share numbers, for our investment portfolio, based on the latest fund information.1,2,3

REITPhilip APACNikko-Straits TradingLion-PhilipOverall Weightage
CAPITALAND MALL TRUST3.6810.2010.007.96
ASCENDAS REIT4.6510.008.207.62
CAPITALAND COMMERCIAL TRUST 8.709.906.20
MAPLETREE COMMERCIAL TRUST 6.409.805.40
MAPLETREE LOGISTICS TRUST 6.205.904.03
MAPLETREE INDUSTRIAL TRUST 5.106.904.00
MAPLETREE NORTH ASIA COMMERCIAL TRUST  4.904.803.23

Fig.1 – Weightage of individual REITs (in %). REITs that are common in at least two REIT ETFs and among the top 10 holdings are selected.

SectorPhilip APACNikko-Straits TradingLion-PhilipOverall Weightage
RETAIL37.7838.0029.2035.08
INDUSTRIAL17.3721.3023.9020.82
DIVERSIFIED27.6417.008.4017.67
OFFICE13.5317.9019.3016.89
HOTEL & RESORT0.962.308.103.78

Fig. 2 – Weightage of REITs by sector (in %). Only top 5 sectors are shown.

Based on the above two tables, we can see that, if the three REIT ETFs are combined into one, Capitaland Mall Trust is the highest holding at 7.96%, with Ascendas coming in second at 7.62%. The biggest component, which is the retail sector, is slightly above 35%, with industrial coming in second at around 21%. However, this status does not remain stagnant as the weightages do change from time to time, though mostly not by that much. If you know some “Google-Fu”, you can check out the weightages from past fund information documents.

A lot of discussion points can be generated based on the above numbers, ranging from the superficial (e.g. which ETF to go to for an all-rounder sector coverage) to the complex that involves looking deeper at various degrees and from different dimensions (e.g. the high concentration of retail REITs in the ETFs, and how shopping habits and the impact of electronic commerce could erode their returns). I would stop at here for now, and I hope at least the above numbers can spark some analysis of your own.


1 – Philip SGX APAC Dividend Leaders REIT ETF. Product Info Sheet. December 2018. https://www.phillipfunds.com/uploads/funds_file/201812_Phillip_SGX_APAC_Dividend_Leaders_REIT_ETF_Product_Sheet.pdf (accessed 8 Feb 2019)

2 – NikkoAM-Straits Trading Asia ex Japan REIT ETF. Factsheet. 31 December 2018. https://www.nikkoam.com.sg/files/documents/funds/fact_sheet/axj_reit_etf_fs.pdf?v20170630 (accessed 8 Feb 2019)

3 – Lion-Philip S-REIT ETF. Fund Information. December 2018. https://lgi.nextview.com/doc/uploads/documents/index.php?type=FS&fid=LEPF&lang=EN (accessed 8 Feb 2019)