Syfe REIT+ Index changes
Investment Personal Finance

Syfe REIT+ Index Changes

Syfe just announced that there will be a change to their REIT+ portfolio. From 17th July, the REIT+ portfolio will track the iEdge S-REIT Leaders Index instead of the iEdge S-REIT 20 Index. At launched, the REIT+ product was touted as the cheapest way someone could diversify into the S-REIT market. Will this change anything and how much will this change impact you as a customer? Let’s find out.

Details of change

As we know, Singapore is a very favourable destination for property investors. This has in turned created a lot of heavyweight REITs in the country. It becomes harder for just the biggest 20 REITs to represent the entire market. SGX has therefore decided to modify the index to include the most traded REITs in the market instead.

With this change, instead of benefitting only from the 20 REITs with the biggest cap, we’ll get more diversification with smaller-cap REITs. This makes sense in the current economic conditions as the bigger REITs are mostly from certain industries such as industrial. The change will ensure that we get a more diversified portfolio across all the different industries.

As Syfe’s REIT+ portfolio is supposed to track the REITs index, its composition will, therefore, be modified to fit the new index. In their announcement statement, it seems like they will not be fully tracking the index as they will only stick with a total of 20 REITs.

Thoughts on change

All in all, I like that SGX is making this change to reflect the significance of REITs in the Singapore industry. Certain industries currently skews the market heavily. While huge, these industries are not immune to concentration risk. With more diversification across sectors, we can lower the risk if we ever undergo any structural changes in the economy.

By buying into industries such as hospitality which may not be as favourable right now, we can ensure that we take advantage of its recovery whenever that happens. Overall, I feel that this index change by SGX is a positive change.

As for Syfe’s decision to stick with just 20 REITs, I’m not completely sold on it. With about 5 main REITs industry, there will be approximately 4 REITs representing each industry. I don’t know if that will be very representative and provide enough risk tolerance.

We can only know its full effects when the change actually happens. Even then, only time will tell if Syfe’s strategy of sticking with 20 is a good decision.

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