Nikko launches first ETF tracking Asia REITs

Mar 29th, 2017 | By | Category: Alternatives / Multi-Asset

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Nikko Asset Management has launched a new ETF on the Singapore Exchange that tracks the performance of Asian real estate investment trusts (REITs). The Nikko AM-Straits Trading Asia ex-Japan REIT ETF (SGX: CFA) is the first ETF globally to track Asian REITs.

Nikko launches first ETF tracking Asia REITs

The market capitalisation of Asia REITs has grown from $20bn in 2006 to $120bn at the end of 2016.

Underlying the ETF is the FTSE EPRA/NAREIT Asia ex-Japan REITs Index, which tracks the performance of 23 REITs from across Asia excluding Japan. Listed REITs are screened for liquidity, size and revenue to ensure investability. Constituents are weighted by market capitalisation with a 10% cap per REIT. The largest constituent is currently Ascendas REIT with a weight of 10%.

Phillip Yeo, International Head of Product Development at Nikko AM, said: “We are pleased to collaborate with FTSE Russell to launch the first Asian REIT ETF in the world. The index is of high quality because of the stringent index methodology and at the same time, high appeal because of the rich dividend content in the constituent REITs.”

Singapore is the largest country representation with 58% of the portfolio weight, with Hong Kong (21%) and China (12%) making up the next two largest country allocations. The sub-sector breakdown is dominated by industrial & office REITs and retail REITs, which make up 44% and 40% respectively.

Over the last five years, the index (denominated in Singapore dollars) has returned 11% per annum, 5% of which were dividends, with an annual volatility of 11% and a maximum drawdown of 22%. The index currently has a dividend yield of 6% and the ETF will distribute dividends quarterly.

The ETF is physically replicated with a management fee of 0.50%.

The FTSE ERPA/NAREIT Global Real Estate Index series is currently tracked by more than 26 ETFs with over $10 billion total AUM. As of December 2016, there were 83 Asian REITs with a market capitalisation of over $120bn, up from $20bn in 2006.

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