Two Easy Ways to Invest in S-REITs
One preferred way does not require stock picking or reading through reams of earnings reports.
The expectation of interest rate cuts by the US Federal Reserve has renewed many investors’ interest in Singapore REITs.
In the past few weeks, DBS Research, OCBC Research and Maybank Research have called out a potential turning point in S-REITs in 2H2024.
According to the research houses, the upside catalyst for S-REITs, a sub-asset class which has suffered three years of underperformance due to the Fed hiking cycle, is the Fed's pivot to cut interest rates soon.
The time has come for policy to adjust. The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook and the balance of risks.
- Fed Chairman Jay Powell, August 2024, Jackson Hole
The market is expecting the Fed to cut between 25-50bps in September. It is also expecting between 3 to 4 interest rate cuts in 2H2024. Many of you might ask, what do incoming US rate cuts mean for S-REITs?
Lower US Interest Rates will lower the cost of borrowing for S-REITs
OCBC Investment Research has pointed out that S-REIT performance is “closely tied” to the 10-year US Treasury yield and the 10-year Singapore Government bond yield.
Over the past year's earnings results, S-REITs have suffered weak share price performance due to higher borrowing costs, FX losses due to a stronger SGD, and enlarged unit bases as more REITs issued additional equity to raise funds.
This has more than “offset the improvements in net property income (NPI) and divestment gains.”
As a result, many of the S-REITs reported lower DPU while only a small group including Parkway Life REIT reported single-digit DPU growth.
However, this may be set to change as the interest rate environment becomes more forgiving of S-REITs and their debt costs.
How Do I Invest in S-REITs? Here is an actively managed S-REIT portfolio with fees as low as passive ETFs
There is a way to invest in S-REITs available for investors who prefer not to pick individual stocks, manually reinvest their dividends or bother with the hassle of individual corporate actions.
If you would like a REIT portfolio without the hassle of opening a brokerage account, Syfe’s REIT+ portfolio is good for passive management on your part. The REIT+ portfolio is invested in Singapore’s 20 top REITs. As of August 2024, the portfolio has a forward dividend yield of about 5.7% and has returned about 7.3% in 2023, including the reinvestment of dividends.
Three things I like about the Syfe REIT+ portfolio: firstly, it has no exposure to the REITs that have seen suspensions in their dividends this year.
The second aspect I like about the Syfe REIT+ portfolio is that the management fee of the Syfe REIT+ portfolio ranges from 0.25-0.65%, which is comparable to the passively managed S-REIT ETFs that have expense ratios from 0.55% to 0.8%. What that means is, you have an actively managed REIT portfolio that costs the same as a passively managed ETF.
Thirdly, the REIT+ portfolio is benchmarked to the CSOP iEdge S-REIT Leaders ETF, which has exposure exclusively to Singapore REITs. This reduces the risk of FX losses arising from a strong Singapore dollar versus weaker currencies.
You can invest in the Syfe REIT+ portfolio here. You can use my exclusive promo code FAM2024 for up to $200 of rewards, including a 6-month fee waiver.
Invest Directly in S-REITs with Syfe Trade
If stock picking is your cup of tea, you may like to invest directly in S-REITs via Syfe Trade.
Syfe Trade charges only 0.04%-0.06% commission, with transparent pricing and no hidden platform fees. It offers trading in over 660 Singapore stocks, REITs and ETFs.
If you enjoy trading in US markets, Syfe Trade offers trading in 11,000 US-listed stocks and ETFs. You can enjoy unlimited free trades in the first 3 months, and at least 2 free trades thereafter.
What I like about Syfe Trade is that it has three interesting features: auto price alerts for those who would like to DCA at preset prices, auto-reinvestments of dividends and the ability to replicate thematic investments such as Warren Buffet’s portfolio or the Magnificent Seven stocks.
You can access Syfe Trade here, and earn up to $100 of cash credits in your brokerage account using my promo code FAM2024.
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LEGAL DISCLAIMER: This content is for informational purposes only. You should not construe such information as material for financial, legal, investment or tax advice. Views and opinions expressed by The Family Investor are personal and not meant to constitute advice. In exchange for using this site, you agree not to hold The Family Investor liable for any claims of damages upon decisions you make after visiting this site. The Family Investor is a member of Syfe’s affiliate programme. Please note that past performance does not indicate future performance. If in doubt, please seek advice from a financial advisor.