With many internet bloggers giving their views of Lion-Phillip S-Reit ETF (CLR.SI), I do not want to sound like a broken record. I want to focus on try to derive how Morning Star selects which reit to out into their basket
Morning Star says the REITs are scored on basis of
- Dividend Yield
- Economic Moat
- Distance to default
These 3 scores contribute equal weights. REITs with above average scores are allocated more weight in the index. The number of REITs in this index is variable. Morning Star rebalances its constituents semi annually in June and December.
The 23 REITs that is in.
- CapitaLand Mall
- CapitaLand Retail Commercial
- CapitaLand China
- CDL HTrust
- Far East Hospitality
- Frasers Centrepoint
- Frasers Commercial
- Frasers HTrust
- Frasers L&I
- First Reit
- Keppel Reit
- Keppel DC
- Mapletree Commercial
- Mapletree Industrial
- Mapletree Logistics
- Mapletree GCC
- OUE HTrust
- Parkway Life
The 14 missing REITS:
- OUE Commercial
- Ascendas HTrust
- EC World
- US Manulife
- All the REITs that are in have Market Cap above S$1B, which means that none of the REITs with market cap below S$1B made it into their index.
- Only 2x REITs with market cap above S$1B did not make it into their index – SPH Reit and Fortune. My speculation is that these 2 REITS has too few properties. All other REITs that made it into the index has more properties.
- Almost all the selected REITs have the lowest dividend yields amongst the SREITs universe – except for LippoMalls. If I were to buy this index, I am probably buying the lowest yields of the SREITs universe, but probably the strongest.
A few years ago, I would probably would have considered buying this ETF. But with continual education,
- I hope to and expect to be able to select my own REITs to outperform the index
- I will try to save the 0.5% management fee. 0.5% of 4.8% means 10% of my dividends returns is paid to Phillip per year.
- Distributions made by S-REITs to Lion-Phillip S-Reit ETF will be subjected to 17% Singapore corporate tax. Instead of getting 4.8% yield, I could have been getting 5.6% if there were no such corporate tax.
- Personally, my preferred REIT ETF is NikkoAM-STC Asia REIT (CFA.SI)
- 40% exposure to other countries will further diversify my portfolio
- they are most closely aligned to passive investing (read https://www.cheerfulegg.com/2017/12/10/which-singapore-reit-etf-would-i-invest-in/)
- Both NikkoAM-STC Asia Reit as well as Lion-Phillip S-Reit can be supercharged, meaning financing at 2.88% and earning difference between rates.
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