New kid on the block

SGX Centre 1 at Shenton Way Road in the Raffles Place District.
SGX Centre 1 at Shenton Way Road in the Raffles Place District.PHOTO: ST FILE

Investors in Singapore were attracted to the recently listed Phillip SGX Apac Dividend Leaders Reit ETF (exchange-traded fund), thanks to its many "firsts".

Besides being the first Reit ETF to be listed here, it is also the first and only ETF in the world that focuses on Asia-Pacific (Apac) Reits, and the first to be dividend-weighted instead of market capitalisation-weighted. The former places emphasis on how much in dividends a stock pays out; the latter looks at how big the firms are.

The dual-currency ETF allows investors to invest in US or Singapore dollars. Dividends will be paid out twice a year.

Issued and managed by Phillip Capital Management, the ETF tracks the performance of the SGX Apac Ex-Japan Dividend Leaders Reit Index. It captures 30 top-dividend Reits in the Asia-Pacific region - including 14 SGX-listed Reits - excluding Japan, by ranking and weighing the underlying Reits according to the total dividends paid in the previous 12 months.

Phillip Capital Management's chief investment officer Jeffrey Lee says: "The Asia-Pacific Reit ETF does not merely look at Reits that pay the highest dividend yield but selects the larger and established Reits with the ability to pay dividends during both good and bad times."

The newly listed Asia-Pacific Reit ETF is expected to yield around 5 per cent in dividends, or 4.5 per cent excluding the 0.5 per cent management fee.

Reflecting strong demand, this Reit ETF issued at 93.3 US cents raised more than US$30 million, mainly from local investors, at its first closing. One-third of them are retail investors, with the rest institutional investors.

Market observers have suggested that there is scope for the management fee to be lower, given that ETFs with passive strategies generally have lower fees of between 0.1 per cent and 0.3 per cent.

Phillip Capital Management has said it is open to lowering the fee of the ETF down the road.

Under the index, Singapore Reits (S-Reits) account for 30 per cent of the total dividends paid out by the 30 Asia-Pacific Reits. Australia Reits make up a larger 60 per cent while Hong Kong Reits account for the balance.

Looking ahead, Phillip Capital is keen to issue an ETF that tracks only S-Reits, so watch this space.

Lorna Tan

A version of this article appeared in the print edition of The Sunday Times on October 30, 2016, with the headline 'New kid on the block'. Print Edition | Subscribe