SGX launches dividend-weighted Asia Pac ex Japan REIT index; to underlie Phillips Capital ETF

Sep 2nd, 2016 | By | Category: Alternatives / Multi-Asset

ETF STRATEGY NEWS! ETF Strategy is delighted to announce the launch of ETF Strategy Hub (hub.etfstrategy.com), an on-demand repository of webcasts, videos, podcasts and white papers. Debuting with Special Series on Technology & Innovation in China and the Digital Economy.


Singapore Exchange (SGX) has unveiled a new smart beta index – the SGX APAC ex Japan Dividend Leaders REIT Index – composed of 30 real estate investment trusts (REITs) across the Asia Pacific ex Japan region. The index, which weights constituents according to dividends, has been licensed to Phillip Capital Management for the creation of an exchange-traded fund to be listed on SGX.

SGX launches smart beta REIT index covering Asia Pacific ex Japan

The SGX APAC ex Japan Dividend Leaders REIT Index, composed of 30 of the largest dividend paying REITs in the Asia Pacific ex Japan region, will underlie a future ETF to be launched by Phillip Capital Management.

Loh Boon Chye, CEO of SGX, commented: “I am delighted with the launch of our first Pan-Asian index and that it will be used as a benchmark for an ETF.”

He added: “As SGX’s first truly regional index, it broadens our offering beyond the Singapore equity market, demonstrating our continued push to provide investors access to diverse opportunities. The demand for index-linked investment opportunities is increasing rapidly across Asia, and SGX is committed to supporting this growth through our comprehensive index services.”

The index measures the performance of REITs that pay the largest dividends within the Asia Pacific ex Japan region. It captures over 70% of the region’s REIT universe by total capitalisation, taking into consideration size, free-float and liquidity.  All constituent weights are capped at 10% to ensure greater portfolio diversification.

By weighting constituents according to dividends, SGX seeks to further boost the yield profile of the index. This strategy may prove attractive to investors who have broadened their search for yield in the face of persistently low, and sometimes negative, interest rates in major developed markets. As REITs are legally mandated to pay out a percentage of their taxable income in dividends, the prospective Phillips ETF may also offer a greater degree of dividend sustainability compared to many dividend-focused equity ETFs.

Jeffrey Lee, MD and Co-CIO of Phillip Capital Management, added: “We are very excited to be working with SGX on producing a unique index where the underlying REIT constituents are weighted by total dividends paid in the preceding 12 months. The prospective ETF will offer investors transparent and low cost access to a diverse basket of quality REITs, many of which we have been investing in over the past decade through our actively-managed REIT funds. In view of the growing demand we see from our investors for sustainable income and the rise of passive investing, this is a highly opportune time to launch the first Asia Pacific REIT ETF comprising the region’s largest dividend-paying REITs.”

The index’s total return over the twelve months to 29 July 2016 was 19.9%, demonstrating a yield over the same period of 4.5%. The index’s annualised return over the past five years is 9.8%.

As of 29 July 2016, the index was composed primarily of Australian REITs (61%), followed by Singapore REITs (27%) and Hong Kong REITs (12%). The largest classification type is commercial REITS (73%), followed by diversified REITs (16%), and residential REITs (9%).

In the UK, investors may gain access to Asian real estate through the iShares Asia Property Yield UCITS ETF (LSE: IASP). The underlying index is the FTSE EPRA/NAREIT Developed Asia Dividend+ Index, which, as of 30 August 2016, had its largest exposure in Hong Kong (33.9%), followed by Australia (28.1%), Japan (27.4%) and Singapore (8.9%). While the largest sector exposure is not to REITs but to Real Estate Holding & Development Companies (30.7%), REITs play a significant role in the portfolio which include retail REITs (28.7%), industrial & office REITs (19.5%), diversified REITs (11.0%) and residential REITs (6.7%). The fund has over $280m in assets under management and a total expense ratio of 0.59%.

Although Asia is currently a small market for ETFs compared to regions such as North America or Europe, significant growth in the industry is expected particularly as markets become more integrated and a wider product range is introduced. According to a recent report issued by the asset management arm of multinational professional services provider PricewaterhouseCoopers, survey respondents predict assets will reach $560bn by 2021, corresponding to a 22% compound annual growth rate.

Tags: , , , , , , , ,

Leave a Comment