facebookCan you please recommend a S-Reit ETF among the variety out there? - Seedly

Anonymous

29 Oct 2019

General Investing

Can you please recommend a S-Reit ETF among the variety out there?

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Arpita Mukherjee

29 Oct 2019

Community Evangelist at Kristal.AI

Hi Anon,

Based on quality and assets under management (AUM) as of April 6, 2019, here’s a curated list of the top real estate ETFs for you to choose from:

Vanguard Real Estate ETF (VNQ)

Avg. Volume: 7 million

Net Assets: $61 billion

P/E Ratio (TTM): 27.6

Yield: 3.96%

YTD Return: 17.89%

Expense Ratio (net): 0.12%

Schwab U.S. REIT ETF (SCHH)

Avg. Volume: 828,000

Net Assets: $5.45 billion

P/E Ratio (TTM): 31.5

Yield: 2.85%

YTD Return: 16.7%

Expense Ratio (net): 0.07%

iShares U.S. Real Estate ETF (IYR)

Avg. Volume: 9.1 million

Net Assets: $4.6 billion

P/E Ratio (TTM): 33.7

Yield: 3.0%

YTD Return: 17.4%

Expense Ratio (net): 0.43%

iShares Cohen & Steers REIT ETF (ICF)

Avg. Volume: 124,000

Net Assets: $2.18 billion

P/E Ratio (TTM): 14.3

Yield: 2.7%

YTD Return: 17.3%

Expense Ratio (net): 0.34%

SPDR Dow Jones REIT ETF (RWR)

Avg. Volume: 249,000

Net Assets: $2.94 billion

P/E Ratio (TTM): 33.4

Yield: 3.7%

YTD Return: 16.3%

Expense Ratio (net): 0.25%

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Hi there!

All 3 S-REIT ETFs charges a recurring management fee. Lion Phillip S-REIT and Nikko AM-Straits Trading ex-Japan REIT ETF charges a 0.5% management fee while the newer (recently listed) Phillip SGX APAC Dividend REIT ETF charges lower at 0.3%.

Another factor to consider is the diversification of each REIT ETF. Lion-Phillip S-REIT has the best sectorial diversification while Phillip SGX APAC Dividend REIT ETF has a higher propotion of Retail REITs. Taking a geographic diversification angle, none of the REITs ETF show good diversification. Lion-Phillip S-REIT ETF has a high concentration of assets in Australia while Nikko AM-Straits Trading REIT ETF in Singapore. Phillip SGX APAC Dividend REIT ETF has a better mix (50% weightage in Austrialia and 30% in Singapore).

One thing to note is that while REITs are non-taxable income, REIT ETFs are taxable and thus reduces yields. This explains the low yields of all 3 REIT ETF at 5% of lower.

REIT ETFs are more appropriate for investors with smaller capital as they can take advantage of REIT ETFs for diversification. However, for investors with large capital, this diversification can be easily achieved by directly owning a portfolio of REITs.

Personally, the best option would be Phillip SGX APAC Dividend REIT ETF due to its lower management fees and better geographical diversification as compared to the other S-REIT ETFs.

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