Good news for index investors; There will be another REIT ETF coming out by end March 2017. Called the NikkoAM-Straits Trading Asia ex Japan REIT ETF, this would be the second REIT ETF listed in the local Singapore Exchange after the earlier Phillip SGX APAC Dividend Leaders REIT ETF, which was launched in October 2016.
About the ETF
Nikko Asset Management, the people who brought you the Nikko AM Singapore STI ETF and the ABF Singapore Bond Index Fund, manages the NikkoAM-Straits Trading Asia ex Japan REIT ETF (for simplicity let us call it NikkoAM-Straits Trading REIT ETF). The investment adviser is SRE Capital, which is a subsidiary of Straits Trading Company Limited, hence the name in the ETF.
From the brochure1, the ETF tracks the FTSE ERPA/NAREIT Asia ex Japan Net Total Return REIT Index. The ETF is expected to generate a yield of 5% per year, and dividends are to be paid quarterly. It is Asia-centric, with 79.4% of the ETF concentrated on REITs from Singapore and Hong Kong. Also, 84.8% of the ETF would be on industrial, office and retail REITs.
Simple Comparison with the Phillip REIT ETF
Let us compare this REIT ETF and the Phillip SGX APAC Dividend Leaders REIT ETF2, or we call it the Phillip REIT ETF for short. First, it is obvious that both are tracking different indices. The next major difference would be the geographical coverage of both ETFs; 58.8% of the Phillip REIT ETF holdings are based in Australia, and 29.5% in Singapore, as compared to the NikkoAM-Straits Trading REIT ETF’s 0% in Australia and 58% in Singapore.
It is interesting to note that both ETFs have almost the same REIT holdings when it comes to Singapore and Hong Kong; both have the Hong Kong-based Link REIT, and Singapore-based Ascendas REIT and CapitaLand Mall Trust.
The Bedokian’s Take
In my opinion, both ETFs can be included in the REIT portion of The Bedokian Portfolio. The only major difference would be the geographical exposure; the NikkoAM-Straits Trading REIT ETF is more local based than the Phillip REIT ETF, which is concentrated a bit more on Australian REITs. It is alright to have two in your portfolio but do bear in mind that some of the REITs in the Singapore and Hong Kong portions of both ETFs are the same.
According to The Bedokian Portfolio p 111, the NikkoAM-Straits Trading REIT ETF would be classified as a local ETF.
1 – NikkoAM-Straits Trading Asia ex Japan REIT ETF. http://www.nikkoam.com.sg/files/sp/reit/documents/nikkoam-straitstrading-asia-ex-japan-reit-etf_brochure.pdf?v20170306 (accessed 9 Mar 2017)
2 – Phillip SGX APAC Dividend Leaders REIT ETF. Product Info Sheet (January 2017). http://www.phillipfunds.com/uploads/funds_file/201701_Phillip_SGX_APAC_Dividend_Leaders_REIT_ETF_Product_Info_Sheet.pdf (accessed 9 Mar 2017)
NikkoAM-Straits Trading Asia ex Japan REIT ETF. Prospectus dated 27 February 2017. http://www.nikkoam.com.sg/files/sp/reit/documents/nikkoam-straitstrading-asia-ex-japan-reit-etf_prospectus.pdf?v20170301 (accessed 9 Mar 2017)