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Introduction

Hello investors! Today we’re diving deep into Singapore’s REIT market and comparing two increasingly popular investment vehicles: Syfe REIT+ and traditional REIT ETFs. In a financial landscape where property prices continue to rise, REITs offer ordinary investors a chance to own a slice of premium real estate without the hefty capital requirements or management headaches.

But which vehicle is better for accessing these investments? By the end of this video, you’ll understand the nuanced differences between Syfe REIT+ and REIT ETFs, and more importantly, which might be better aligned with your personal investment strategy.

The Singapore REIT Landscape in 2025

Before we compare these investment vehicles, let’s take a moment to understand the Singapore REIT market in 2025. Singapore has established itself as one of Asia’s premier REIT hubs, with over 40 listed REITs and property trusts valued at approximately S$100 billion.

Singapore REITs have historically offered attractive dividend yields between 4-7%, significantly higher than government bonds or fixed deposits. This yield premium has made them particularly attractive in the current economic environment, despite the challenges posed by interest rate fluctuations.

What Are They?

Syfe REIT+

Syfe REIT+ is a specialized portfolio offering from Syfe, a digital wealth management platform launched in 2019. This investment product creates a portfolio of 20 carefully selected Singapore REITs, designed to track the iEdge S-REIT Leaders index.

What makes Syfe REIT+ unique is that when you invest, Syfe actually purchases the underlying REITs on your behalf—you own the actual REIT units, not shares in a fund that owns REITs. This creates a direct ownership structure that has several implications we’ll explore shortly.

REIT ETFs

REIT ETFs are exchange-traded funds that trade on the Singapore Exchange (SGX). The most comparable ones to Syfe REIT+ include:

1. CSOP iEdge S-REIT Leaders Index ETF – Launched in 2020, this ETF tracks the same index as Syfe REIT+.
2. Lion-Phillip S-REIT ETF – Tracks the Morningstar Singapore REIT Yield Focus Index.
3. NikkoAM-Straits Trading Asia Ex-Japan REIT ETF – Provides broader exposure to REITs across Asia.
4. Phillip SGX APAC Dividend Leaders REIT ETF – Focuses on high-dividend REITs across the Asia-Pacific region.

Unlike Syfe REIT+, when you purchase shares of these ETFs, you’re buying into a fund structure—you don’t directly own the underlying REITs.

Deep Dive: Structure and Ownership

The Direct Ownership Advantage

With Syfe REIT+, you’re the beneficial owner of the actual REITs. This creates several interesting implications:

1. Tax Efficiency – There’s no additional layer of corporate taxation as might occur in some fund structures.
2. Transparency – You can see exactly which REITs you own and in what proportions.
3. Corporate Actions – You participate directly in rights issues and other corporate actions.

In contrast, ETFs operate as a separate entity that owns the REITs. When you buy an ETF share, you’re one step removed from the underlying assets. This creates a cleaner, simpler ownership experience but adds that additional layer between you and the actual REITs.

Portfolio Construction Methodology

Syfe REIT+ doesn’t just passively track the index—it employs an optimized approach. The portfolio managers aim to achieve low tracking error while maintaining sufficient liquidity, sometimes by adjusting weightings of certain REITs.

REIT ETFs typically follow strict index-tracking methodologies with minimal active management. This creates predictability but may sometimes result in overexposure to certain sectors or properties based solely on market capitalization.

Fees and Costs: The Hidden Impact on Returns

Syfe REIT+ Fee Structure

Syfe REIT+ uses a tiered fee structure based on your total investment across all Syfe products:

• 0.65% annually for investments under S$50,000 (Basic tier)
• 0.55% annually for S$50,000 to S$250,000 (Black tier)
• 0.45% annually for S$250,000 to S$1,000,000 (Gold tier)
• 0.35% annually for investments above S$1,000,000 (Platinum tier)

These are all-in fees—no additional transaction costs, platform fees, or custody charges. This simplicity makes it easier to calculate your true investment costs.

REIT ETF Cost Layers

REIT ETFs have multiple cost components that can be less transparent:

1. Management Fee – Typically 0.5% to 0.95% annually
2. Brokerage Commissions – Usually around 0.08% to 0.28% per transaction
3. Bid-Ask Spreads – The CSOP iEdge S-REIT Leaders Index ETF, for example, had an average bid-ask spread of about 0.15% in 2024
4. Custody and Clearing Fees – Additional small fees charged by brokerages

For buy-and-hold investors, these transaction costs may be minimal, but for regular traders or dollar-cost averagers, they can significantly impact returns over time.

The Compound Impact of Fee Differences

Let’s put this into perspective: A 0.3% difference in annual fees on a S$50,000 investment compounds to approximately S$3,600 over 20 years, assuming a 6% annual return. This isn’t insignificant, especially when considering that REITs are often held as long-term income investments.

Dividend Treatment: Compounding’s Hidden Power

Syfe REIT+ Dividend Reinvestment

One of Syfe REIT+’s most compelling features is automatic dividend reinvestment. When your REITs distribute dividends, Syfe automatically reinvests them into your portfolio at no additional cost.

This creates a powerful compounding effect. For instance, a portfolio with a 5% dividend yield that reinvests all dividends will grow approximately 28% more over 10 years compared to one that doesn’t reinvest, assuming stable prices.

This automatic reinvestment is unavailable for the Basic and Black tiers (investments under S$100,000). For higher tiers, dividends can be withdrawn if preferred.

ETF Dividend Distribution

Most Singapore REIT ETFs distribute dividends semi-annually or quarterly directly to your brokerage account or designated bank account. While this provides regular income, it creates what investment professionals call “cash drag”—idle money not working for you.

To reinvest these dividends, you’d need to manually make additional ETF purchases, incurring transaction fees each time. For smaller dividend amounts, these fees might make reinvestment impractical until you’ve accumulated a larger sum.

Liquidity and Trading: When Timing Matters

The ETF Liquidity Advantage

REIT ETFs offer a significant advantage in liquidity and trading flexibility:

1. Intraday Trading – You can buy or sell at any time during market hours.
2. Limit Orders – You can set specific price points for execution.
3. Stop-Loss Orders – You can automate your risk management.
4. Immediate Execution – Trades are completed within seconds.

This flexibility can be crucial during market volatility or when you need immediate access to capital.

Syfe REIT+ Execution Timeline

Syfe REIT+ operates on a different timeline:

1. Trade Execution – Buy orders typically take 1-2 business days to execute.
2. Withdrawal Processing – Selling REITs and withdrawing funds usually takes 3-4 business days.
3. No Intraday Timing – You cannot time your entry or exit within the trading day.

For long-term investors, this delay may be inconsequential. However, for those who value precise market timing or might need emergency liquidity, this is an important consideration.

Risk Management: The Hybrid Approach

Syfe’s Unique Risk Management Option

Syfe offers an innovative option called “REITs with Risk Management,” which incorporates Singapore government bonds alongside REITs. This creates a hybrid portfolio with:

1. Volatility Dampening – Government bonds typically have lower volatility than REITs.
2. Dynamic Allocation – The REIT-to-bond ratio adjusts based on market conditions.
3. Downside Protection – During market turbulence, the bond component helps stabilize portfolio value.

According to Syfe’s backtesting, this approach has historically reduced portfolio drawdowns by approximately 20-30% during market corrections while capturing about 80-90% of the upside during bull markets.

The Pure REIT Exposure of ETFs

Standard REIT ETFs offer pure REIT exposure with no built-in risk management mechanisms. During the 2020 COVID-19 downturn, for example, Singapore REIT ETFs declined by approximately 35-40%, while Syfe’s risk-managed portfolio limited losses to around 25-30%.

This difference highlights an important philosophical distinction: REIT ETFs offer pure market exposure, while Syfe’s risk-managed option prioritizes risk-adjusted returns.

Performance Analysis: Beyond Raw Returns

Historical Performance Context

From 2020 to early 2025, Singapore REITs experienced significant volatility:

1. COVID-19 Impact (2020) – Sharp 35-40% decline followed by partial recovery
2. Inflation Concerns (2022-2023) – Pressure from rising interest rates
3. Stabilization (2024-2025) – Moderate recovery as interest rate expectations moderated

During this period, Syfe REIT+ reportedly outperformed some comparable REIT ETFs by about 1-2% annually after fees. However, this outperformance varied based on which risk management option was selected.

The Risk-Adjusted Perspective

Raw returns don’t tell the complete story. When analyzing through the lens of risk-adjusted metrics:

1. Sharpe Ratio – Syfe’s risk-managed portfolio generally achieved a higher Sharpe ratio (return per unit of risk).
2. Maximum Drawdown – Syfe’s risk-managed option experienced smaller maximum drawdowns.
3. Volatility – The standard deviation of returns was typically lower for Syfe’s risk-managed portfolio.

These metrics suggest that while pure REIT ETFs might occasionally deliver higher raw returns during strong bull markets, Syfe’s approach may provide a smoother investment journey.

Specialized Investment Strategies

Sector and Geographical Tilting

Some investors prefer to overweight specific REIT sectors or geographical areas based on their market outlook. For example, in 2025, many analysts are bullish on industrial REITs due to e-commerce growth and data center REITs due to AI infrastructure demand.

REIT ETFs offer varying exposures:

• CSOP iEdge S-REIT Leaders Index ETF: Diversified Singapore exposure
• NikkoAM-Straits Trading Asia Ex-Japan REIT ETF: Broader Asian exposure including markets like Hong Kong and Australia

Syfe REIT+ remains focused primarily on Singapore REITs, limiting geographical diversification opportunities.

Dollar-Cost Averaging Considerations

For investors practicing dollar-cost averaging (regular fixed investments), the fee structure becomes particularly important:

• Syfe REIT+ allows fee-free regular contributions of any amount, making it highly efficient for small, frequent investments.
• REIT ETFs can become cost-prohibitive for small regular investments due to minimum brokerage fees, though some brokerages now offer reduced fees for regular savings plans.

Tax Implications for Different Investor Types

Singapore Residents

For Singapore residents, dividends from Singapore REITs are generally tax-exempt at the individual level, regardless of whether received through Syfe REIT+ or REIT ETFs.

International Investors

For international investors, the tax situation becomes more complex:

1. Syfe REIT+ – As the beneficial owner of the REITs, international investors may face withholding taxes based on their country’s tax treaties with Singapore.
2. REIT ETFs – The ETF structure might create different tax implications depending on the investor’s jurisdiction and applicable tax treaties.

Who Should Choose Which Option?

Ideal Syfe REIT+ Investors:

1. Long-Term Income Investors – Those focused on dividend reinvestment and compounding
2. Risk-Conscious Investors – Those who value downside protection over maximum returns
3. Hands-Off Investors – Those who prefer a more managed approach
4. Regular Small Investors – Those making frequent small contributions where transaction costs matter
5. Beginning Investors – Those who value simplicity and all-in-one solutions

Ideal REIT ETF Investors:

1. Active Traders – Those who value liquidity and precise market timing
2. Tactical Asset Allocators – Those who adjust exposures based on market conditions
3. Integration-Focused Investors – Those who want REITs as part of a broader brokerage portfolio
4. Regional Diversification Seekers – Those looking for specific geographical exposures
5. Technical Traders – Those who use technical analysis and specific order types

A Hybrid Approach: The Best of Both Worlds?

Some sophisticated investors adopt a hybrid approach:

1. Core-Satellite Strategy – Using Syfe REIT+ as a core holding for automatic dividend reinvestment, while using REIT ETFs for tactical positions
2. Risk-Tiered Approach – Allocating long-term funds to Syfe’s risk-managed option while using pure REIT ETFs for higher risk/return potential
3. Life-Stage Adaptation – Starting with Syfe’s simplicity during wealth accumulation, then transitioning to ETFs during retirement for income control

Future Trends to Watch

Looking ahead, several trends might influence the comparative advantages of these investment vehicles:

1. Fee Compression – Both robo-advisors and ETFs continue to experience downward fee pressure
2. Platform Integration – Increased connectivity between investment platforms
3. New Product Development – Both Syfe and ETF providers continue to innovate
4. Regulatory Changes – Singapore’s regulatory environment continues to evolve for financial products

Conclusion

Both Syfe REIT+ and REIT ETFs offer viable paths to Singapore REIT investing, each with distinct advantages aligned with different investor profiles.

The choice ultimately depends on your personal investment philosophy, time horizon, and priorities. Syfe REIT+ offers a more managed, cost-effective approach with automatic dividend reinvestment and risk management, while REIT ETFs provide greater liquidity, trading flexibility, and potentially broader exposures.

Remember that regardless of which vehicle you choose, Singapore REITs themselves offer an attractive combination of income and growth potential, making them a valuable component of a diversified investment portfolio.

The most important factor isn’t necessarily which vehicle you choose, but rather that you start investing in this asset class with a clear strategy aligned with your long-term financial goals.

Thanks for watching! If you found this comparison helpful, be sure to like, subscribe, and share your thoughts in the comments below.

FAQ: Syfe REIT+ vs REIT ETFs

Today we’re diving into what might be the most significant private markets partnership of 2025. Nikko Asset Management and Tikehau Capital have joined forces to create Tikehau Amova Investment Management – a venture that’s set to reshape how investors access Asian private markets.

If you’ve been looking for ways to diversify beyond traditional stocks and bonds, particularly in Asian markets, this analysis is essential viewing. We’ll break down what this partnership means, the investment strategies they’re launching, and most importantly – how you as an investor might approach this opportunity.

BACKGROUND ON THE JOINT VENTURE

So what exactly is Tikehau Amova Investment Management? Recently incorporated, this joint venture combines Nikko Asset Management’s deep regional expertise across Asia with Tikehau Capital’s alternative investment prowess.

Nikko Asset Management brings to the table its massive distribution network across Japan and the broader Asian region. They’re one of Asia’s largest asset managers with exceptional market insights across the continent.

Tikehau Capital contributes its specialized expertise in private markets – particularly in private debt, private equity, and sustainable investments. They’ve already established a foothold in Asian private debt through their partnership with UOB Kay Hian.

This collaboration isn’t just about pooling resources – it’s a strategic response to the surging investor demand for private asset investment opportunities in Asia. As public markets become increasingly efficient and volatile, the potential alpha in private markets has become too significant to ignore.

KEY INVESTMENT STRATEGIES

Let’s break down the specific investment strategies that Tikehau Amova will focus on.

First, they’re launching a dedicated decarbonization strategy for Asia. This is particularly interesting given the scale of the energy transition challenge facing the region. Asia accounts for nearly 60% of global carbon emissions, creating an enormous opportunity for investment in transition technologies, renewable energy infrastructure, and sustainable businesses.

This strategy will likely target companies driving the low-carbon transition across various sectors – from renewable energy producers to sustainable manufacturing and green building technologies.

The second major focus will be expanding their private debt capabilities. Tikehau already has a strong foundation here with their UOB Kay Hian partnership. Private debt has become increasingly important as many mid-sized Asian companies find themselves underserved by traditional banking but aren’t ready for public markets.

These private debt investments can potentially offer investors enhanced yields compared to traditional fixed income, while still providing more stability than equity investments.

Finally, the joint venture plans to develop entirely new private asset strategies tailored specifically for Asian markets. While details are still emerging, this could include specialized private equity funds targeting specific sectors or regions, real asset investments, or hybrid strategies combining multiple approaches.

The key advantage here is their ability to leverage both firms’ expertise to identify unique investment opportunities that might be overlooked by purely Western or purely local investment houses.

Key Features of the Joint Venture

Strategic Focus: Tikehau Amova aims to address the growing investor demand for private asset investments in Asia while aligning with key secular investment themes, such as decarbonization.

Expertise Combination: The venture leverages Tikehau Capital’s established capabilities in Asian private debt and Nikko Asset Management’s regional expertise.

Product Distribution: Investment products developed by Tikehau Amova will be distributed through the global networks of both Nikko Asset Management and Tikehau Capital.

MARKET OPPORTUNITY ANALYSIS

Now let’s analyze why this joint venture makes strategic sense in today’s investment landscape.

Private markets in Asia are still relatively underdeveloped compared to North America and Europe, representing both a challenge and an opportunity. While the private equity market in the US accounts for roughly 40% of the overall equity market, in Asia that figure sits at less than 10%.

This gap creates a tremendous growth opportunity as Asian economies continue to mature and investor sophistication increases. Many institutional investors are actively looking to increase their private market allocations, particularly in Asia where public markets don’t always provide access to the most dynamic growth sectors of the economy.

Tikehau Amova’s potential advantage lies in combining Western private market expertise with deeply embedded regional networks. This allows them to potentially source deals that purely international firms might miss while applying institutional-quality due diligence processes that might be more robust than some local alternatives.

The distribution network is particularly important here. Nikko’s extensive presence across Asian markets provides ready access to institutional investors, family offices (particularly in Greater China), and potentially even retail investors through appropriate vehicles.

HOW INVESTORS CAN APPROACH THE OPPORTUNITY ?

So now for the most important question – how might investors approach this opportunity?

For institutional investors, Tikehau Amova represents a potential strategic allocation within a broader private markets portfolio. The key considerations here would include:

First, conducting thorough due diligence on the governance structure of the joint venture. How are investment decisions actually made between the two firms? What mechanisms are in place to manage potential conflicts of interest?

Second, evaluating the fee structures relative to comparable offerings. Private market investments typically carry higher fees than traditional assets, so understanding the full cost structure is essential.

Third, starting with a modest allocation until a track record develops. While both parent companies have strong individual track records, the joint venture itself is new, and prudence suggests a measured approach.

For qualified individual investors, approaching Tikehau Amova might involve:

Looking for feeder funds or other accessible investment vehicles. Most private market strategies have high minimum investments, but distribution partners may create more accessible entry points.

Considering liquidity needs carefully. Most private market investments involve lock-up periods of several years. Investors need to ensure they won’t need that capital during the investment horizon.

Starting with smaller allocation percentages – typically in the 5-10% range for most individual portfolios.

For all investor types, key due diligence questions should include:

• How is investment talent being retained and incentivized?
• What is the expected capital deployment timeline?
• How are the economic interests aligned between investors, Tikehau, and Nikko?
• What is the track record of the specific team managing each strategy?

What specific investment strategies will the joint venture focus on?

The joint venture between Nikko Asset Management and Tikehau Capital, named Tikehau Amova Investment Management, will focus on several key investment strategies:

1. Decarbonization in Asia: The venture plans to launch an investment strategy dedicated to decarbonization in the Asian market, aligning with the growing trend of sustainable investing.
2. Asian Private Debt: Tikehau Amova will leverage Tikehau Capital’s established capabilities in Asian private debt, building on their existing strategy and partnership with UOB Kay Hian.
3. Private Asset Investments: The joint venture aims to develop innovative private asset investment strategies tailored specifically to the Asian market, addressing the increasing demand for such investments in the region.
4. Private Equity: While the focus is primarily on Asia, the venture may also utilize Tikehau Capital’s successful track record in private equity across Europe to inform their strategies.

These strategies are designed to capitalize on the growing investor demand for private asset investments in Asia while aligning with key secular investment themes. The joint venture will combine Nikko Asset Management’s extensive regional distribution network and market insights with Tikehau Capital’s expertise in private markets to create unique investment opportunities for both institutional and individual investors across Asia and beyond.

What are the expected growth opportunities for Tikehau Amova in the Asian market?

Tikehau Amova Investment Management, the joint venture between Nikko Asset Management and Tikehau Capital, is poised for significant growth opportunities in the Asian market:

Key Growth Areas

1. Decarbonization Strategy

Tikehau Amova plans to launch a dedicated investment strategy focused on decarbonization in Asia13. This initiative aligns with:

• Growing investor demand for sustainable investments
• Key secular investment themes in the region
• Tikehau Capital’s expertise in private equity across Europe

2. Private Debt Expansion

The joint venture will leverage Tikehau Capital’s established capabilities in Asian private debt23. This includes:

• Building on Tikehau’s existing strategy with UOB Kay Hian
• Addressing the increasing demand for private credit in Asia
• Providing financing to mid-sized corporates across the region

3. Innovative Private Asset Strategies

Tikehau Amova aims to develop new, Asia-focused private asset investment strategies14. These will:

• Combine the complementary expertise of both firms
• Address the growing investor demand for private asset investments in Asia
• Potentially include private equity and other alternative asset classes

Market Expansion Opportunities

1. Geographic Reach

The joint venture will benefit from:

• Nikko Asset Management’s extensive regional distribution network6
• Tikehau Capital’s global presence and expertise
• Potential expansion into underrepresented regions in Asia

2. Investor Base Growth

Tikehau Amova is expected to tap into:

• Institutional investors seeking private market exposure in Asia
• Family offices, particularly in Greater China1
• Retail investors through Nikko AM’s distribution channels

3. Product Distribution

Investment products developed by Tikehau Amova will be distributed through:

• Nikko Asset Management’s network in Japan and other Asian markets1
• Tikehau Capital’s global distribution channels
• Potentially reaching a diverse set of investors across Asia and beyond

By capitalizing on these growth opportunities, Tikehau Amova is well-positioned to become a significant player in the Asian private assets market, offering innovative investment solutions tailored to the region’s unique needs and trends.

CONCLUSION

Tikehau Amova Investment Management represents a significant development in Asian private markets. By combining Nikko’s regional expertise and distribution network with Tikehau’s private market capabilities, they’re creating potentially unique investment opportunities focusing on decarbonization, private debt, and other innovative strategies.

For investors seeking diversification beyond traditional assets and exposure to Asian growth themes, this joint venture warrants serious consideration – with appropriate due diligence, of course.

The key takeaways are:

1. This partnership combines complementary strengths in Asian distribution and private market expertise
2. Initial strategies focus on decarbonization and private debt opportunities
3. Investors should approach with appropriate due diligence and allocation sizing
4. The venture addresses growing demand for private market exposure in Asia

Remember that private market investments aren’t suitable for everyone. They typically involve higher fees, longer lock-up periods, and different risk profiles than traditional investments. Always consult with a financial advisor before making significant portfolio changes.

Today we’re diving into a topic that’s crucial for real estate investors: what happens to REITs when interest rates rise. If you’ve been watching the markets, you know that interest rate fluctuations can significantly impact investment performance, and REITs are no exception.

REITs, or Real Estate Investment Trusts, have become popular vehicles for investors seeking exposure to real estate without directly owning property. They offer potential benefits like income through dividends, portfolio diversification, and liquidity. But their relationship with interest rates is complex and important to understand.

In this video, we’ll explore:

• What REITs are and how they work
• The relationship between REITs and interest rates
• Why different types of REITs react differently to rate changes
• Historical performance during rising rate environments
• Strategies for investing in REITs during rising rates
• And what factors beyond interest rates you should consider

Let’s get started!

WHAT ARE REITs?

Before we dive into interest rates, let’s make sure we’re all on the same page about what REITs actually are.

REITs are companies that own, operate, or finance income-producing real estate across various sectors. To qualify as a REIT, a company must distribute at least 90% of its taxable income to shareholders as dividends, which is why REITs often offer attractive yields compared to other investments.

There are three main types of REITs:

1. Equity REITs – Own and manage income-producing real estate
2. Mortgage REITs – Provide financing for real estate by purchasing or originating mortgages and mortgage-backed securities
3. Hybrid REITs – Combine the strategies of both equity and mortgage REITs

REITs can focus on different property sectors like:

• Residential (apartments, single-family homes)
• Commercial (office buildings, shopping centers)
• Healthcare (hospitals, medical offices)
• Industrial (warehouses, distribution centers)
• Hospitality (hotels, resorts)
• Data centers and cell towers
• Self-storage facilities

Each of these sectors has unique characteristics that can influence how they respond to interest rate changes.

THE RELATIONSHIP BETWEEN REITs AND INTEREST RATES

Now, let’s get to our main question: what happens to REITs when interest rates rise?

Conventional wisdom suggests that rising interest rates are bad for REITs, but the reality is more nuanced. There are several mechanisms through which interest rates can affect REITs:

1. Cost of capital effect: Higher rates increase borrowing costs for REITs, potentially squeezing profit margins if they need to refinance existing debt or take on new loans for acquisitions or development.
2. Discount rate effect: Higher interest rates often lead to higher discount rates used by investors to value future cash flows, which can lead to lower REIT valuations.
3. Yield competition effect: As interest rates rise, yields on bonds and other fixed-income investments typically increase as well. This can make REITs less attractive on a relative basis, potentially leading to selling pressure.
4. Economic growth effect: Interest rates often rise during periods of economic expansion, which can lead to higher occupancy rates, rising rents, and increased property values – all positives for REITs.

The interplay of these factors means that the impact of rising rates isn’t straightforward. In fact, historical data shows that REITs don’t always underperform during rate hikes.

HOW DIFFERENT REIT SECTORS RESPOND

Not all REITs respond to rising interest rates in the same way. The impact varies significantly across different property types:

More sensitive to rising rates:

• Mortgage REITs: These are typically the most sensitive to interest rate changes because their business model relies on the spread between their funding costs and the yield on their mortgage investments. When rates rise quickly, this spread can narrow.
• “Bond-like” REITs: REITs with long-term leases, stable cash flows, and limited growth opportunities often behave more like bonds. Examples include healthcare REITs with triple-net leases or office REITs with long-term corporate tenants.

Less sensitive or potentially benefiting from rising rates:

• Short-lease REITs: REITs with shorter lease terms can adapt more quickly to an inflationary environment by raising rents. This includes hotels (daily leases), apartments (usually annual leases), and self-storage facilities.
• Economically sensitive REITs: Industrial, retail, and some office REITs may benefit from the economic growth that often accompanies rising rates, potentially offsetting higher borrowing costs.
• REITs with fixed-rate debt: Companies that have locked in low interest rates through fixed-rate, long-term debt are partially insulated from immediate impacts of rising rates.

HISTORICAL REIT PERFORMANCE DURING RISING RATES

Looking at past rising rate environments provides valuable insights:

From 2004 to 2006, when the Federal Reserve raised rates 17 consecutive times, REITs actually outperformed the broader market. The FTSE NAREIT All Equity REITs Index delivered a cumulative return of approximately 60% during this period, compared to about 15% for the S&P 500.

Similarly, during the 2015-2018 rate hike cycle, many REIT sectors performed reasonably well, especially those benefiting from secular growth trends like data centers and cell towers.

However, during the 2022-2023 rapid rate increase cycle, REITs as a whole underperformed the broader market significantly, with particularly sharp declines in office and mortgage REITs.

What explains these different outcomes? The pace and magnitude of rate increases matter substantially. Gradual rate increases that accompany economic growth tend to be less problematic than rapid, large increases designed to combat inflation.

Additionally, the starting point for interest rates and REIT valuations plays a crucial role in subsequent performance.

STRATEGIES FOR INVESTING IN REITs DURING RISING RATES

If you’re concerned about rising interest rates, consider these strategies for your REIT investments:

1. Focus on quality: Look for REITs with strong balance sheets, low leverage ratios, well-laddered debt maturities, and high interest coverage ratios. These companies are better positioned to weather interest rate increases.
2. Consider REITs with pricing power: Seek out companies that can increase rents quickly in response to inflation. As mentioned earlier, hotels, apartments, and self-storage facilities have this advantage.
3. Look for growth catalysts: REITs with strong growth prospects can potentially overcome the headwinds of rising rates. These might include REITs exposed to secular trends like e-commerce (industrial REITs), data growth (data center REITs), or demographic shifts (healthcare REITs).
4. Evaluate management teams: REITs with experienced management teams that have successfully navigated previous rate-hike cycles may be better positioned to adapt strategies as needed.
5. Pay attention to valuation: During periods of market stress, indiscriminate selling can create opportunities to buy quality REITs at attractive valuations relative to their net asset values and growth prospects.
6. Consider active management: Given the varying impacts across different REIT sectors and individual companies, an actively managed approach might be beneficial during periods of rate volatility.

BEYOND INTEREST RATES: OTHER FACTORS TO CONSIDER

While interest rates are important, they’re just one of many factors that influence REIT performance:

1. Supply and demand fundamentals: Local market conditions, new construction, and demand for specific property types can have a more direct impact on a REIT’s underlying properties than interest rates.
2. Secular trends: Long-term trends like remote work, e-commerce, aging demographics, and technological change can significantly affect different REIT sectors, sometimes overshadowing interest rate impacts.
3. Regulatory changes: Tax policy, zoning laws, and other regulations can materially impact REIT profitability and valuation.
4. Management quality: The skill of the management team in capital allocation, property development, acquisitions, and operations can make a substantial difference in performance.
5. Geographic exposure: REITs concentrated in high-growth markets may outperform regardless of the interest rate environment.

CONCLUSION

To summarize, while rising interest rates can create challenges for REITs, their impact varies widely depending on REIT type, property sector, balance sheet strength, growth prospects, and the broader economic environment.

Rather than making blanket assumptions about how REITs will perform when rates rise, investors should take a nuanced approach, considering the specific characteristics of individual REITs and the particular nature of each rate-hiking cycle.

Thank you for watching! If you found this information helpful, please like and subscribe for more investment insights. Until next time!

23 Premium REITs in One Investment | 2025 Analysis

Think of the Lion-Phillip S-REIT ETF as a carefully curated basket of Singapore’s premier real estate investment trusts. Launched in October 2017, this ETF offers investors a way to gain exposure to Singapore’s robust real estate market through a single investment vehicle. What makes this ETF particularly interesting is how it combines the stability of real estate with the liquidity of stock market trading.

The ETF’s portfolio construction follows a sophisticated approach. Rather than simply including all available S-REITs, it uses Morningstar’s screening methodology to identify REITs that offer not just high yields, but also demonstrate strong financial health and quality. This is similar to having an experienced property investor who carefully selects properties based on both their rental income potential and underlying value.

The sector allocation tells an interesting story about Singapore’s real estate landscape. Industrial REITs form the largest component at 35.7%, followed by retail REITs at 32.8%. This weighting reflects the strong performance of Singapore’s industrial sector, particularly in areas like logistics and data centers, which have shown resilience even during economic uncertainties. The retail sector’s significant presence demonstrates the enduring value of Singapore’s shopping centers and commercial spaces, despite the growth of e-commerce.

One of the most compelling aspects of this ETF is its geographical diversification. While it’s listed in Singapore, over 85% of the underlying REITs own properties beyond Singapore’s borders. This means investors aren’t just investing in Singapore real estate – they’re gaining exposure to property markets across Asia Pacific and beyond, all while trading in Singapore dollars.

The ETF’s dividend distribution policy aligns well with income-focused investors. It pays dividends twice a year, with recent distributions showing steady income generation. For example, the upcoming dividend payment scheduled for February 26, 2025, is set at 0.0250 per unit, which represents a slight increase from the previous distribution of 0.0215 per unit in August 2024.

However, recent performance data reveals some challenges. The ETF has experienced a decline of 23.85% over the past three years, which can be attributed to several factors including rising interest rates and broader market conditions affecting the REIT sector. This performance trend highlights an important characteristic of REIT investments – while they offer attractive income through dividends, they’re not immune to market cycles and interest rate movements.

For investors considering this ETF, it’s worth understanding the fee structure. The expense ratio of 0.60% might seem modest, but remember that this comes on top of the management fees charged by the underlying REITs. Think of it as paying both the property manager (the individual REITs) and the portfolio manager (the ETF).

Looking ahead, the ETF’s focus on quality REITs with strong financial health positions it well for potential market recovery. The diverse sector exposure across industrial, retail, and office properties provides natural hedging against sector-specific downturns. Additionally, the ETF’s methodology of selecting REITs based on both yield and quality metrics helps ensure that the portfolio consists of sustainable, well-managed properties rather than just high-yield but potentially risky investments.

How the Lion-Phillip S-REIT ETF can fit into different investment strategies?

For the Income-Focused Retiree:

Imagine you’re approaching retirement or already retired. Your primary goal is to create a reliable stream of passive income to supplement your retirement funds. This is where the Lion-Phillip S-REIT ETF can play a crucial role in your portfolio. With its semi-annual dividend distributions and focus on high-quality, income-generating properties, it’s like having a diversified property portfolio working for you without the headaches of being a landlord. The ETF’s current dividend schedule, with payments in February and August, can help you plan your retirement income more effectively.

For the Growth-Oriented Young Professional

If you’re in your 20s or 30s and looking to build long-term wealth, this ETF offers an interesting proposition. Think of it as buying into Singapore’s premium real estate market at a fraction of the cost. While recent performance shows some challenges with a three-year decline of 23.85%, this could present an opportunity for long-term investors. You can gradually accumulate units through regular investment plans, taking advantage of dollar-cost averaging. The beauty here is that you’re not just investing in Singapore – remember, over 85% of the underlying properties are spread across Asia Pacific and beyond, giving you international real estate exposure from the start.

For the Balanced Portfolio Strategist

If you’re someone who believes in maintaining a well-balanced investment portfolio, the Lion-Phillip S-REIT ETF can serve as your real estate allocation component. Traditional portfolio theory suggests having 5-15% exposure to real estate, and this ETF makes it simple to achieve that allocation. What’s particularly valuable is how it can act as a partial hedge against inflation, since property rents and values typically adjust upward with inflation over time. The ETF’s mix of industrial, retail, and office properties provides natural diversification within the real estate sector itself.

For the Conservative Investor

For those who prefer a more conservative approach to investing, this ETF offers several appealing features. The Morningstar screening methodology helps ensure you’re investing in REITs with strong financial health and sustainable business models. It’s like having a professional property analyst scrutinizing each investment for you. The regular income stream can be particularly comforting for conservative investors who prefer predictable returns over capital appreciation.

For the Global Macro Investor

If you’re someone who invests based on broader economic trends, this ETF can be an interesting tool. Through its underlying REITs, you gain exposure to various property cycles across different countries. For instance, when Singapore’s office market might be cooling, the industrial properties in Australia or retail spaces in Japan might be performing well. This geographical diversification allows you to participate in regional property trends without having to directly invest in foreign real estate markets.

For the ESG-Conscious Investor

While not explicitly marketed as an ESG product, many of the underlying REITs in this ETF are increasingly focusing on sustainable property management and green building certifications. This means you’re often investing in properties that are being upgraded to meet modern environmental standards, which could be crucial for long-term sustainability and value preservation.

The Smart Way to Use This ETF Regardless of your investment strategy, it’s worth considering a staged approach to building your position. The current market conditions, with REITs generally under pressure from higher interest rates, suggest that averaging in over time might be prudent. You could start with a core position and gradually increase it as market conditions evolve or as your investment needs change.

What I find particularly interesting is how this ETF can serve multiple purposes in a portfolio – from being a pure income generator for retirees to acting as a growth vehicle for younger investors. The key is aligning the allocation with your personal investment timeline and risk tolerance.