Digital wealth manager Syfe has replaced OUE REIT TS0U with Starhill Global REIT P40U in its Syfe REIT+ portfolio, as part of a semi-annual rebalancing that was completed on Sept 24. The move reverses a shift from April, when Starhill Global REIT was replaced with OUE REIT.
The Syfe REIT+ portfolio tracks the iEdge S-REIT Leaders Index, which is also rebalanced twice a year.
In an email to users on Sept 25, Syfe says OUE REIT was removed from the iEdge S-REIT Leaders Index “due to limited liquidity”. Prior to the change, OUE REIT had held a 0.52% weight in the Syfe REIT+ portfolio.
Following the rebalancing, Starhill Global REIT now has a 0.33% weight. The other REITs with less than 1% of weight in the 20-strong portfolio are Far East Hospitality Trust Q5T (0.48%), AIMS APAC REIT (0.57%) and CDL Hospitality Trusts J85 (0.66%).
Compared to six months ago, two of Mapletree’s REITs have replaced two of CapitaLand’s REITs as the largest constituents in the Syfe REIT+ portfolio. Mapletree Pan Asia Commercial Trust N2IU (10.08%) is now the largest constituent in the portfolio, followed by Mapletree Logistics Trust M44U (10.05%), CapitaLand Integrated Commercial Trust C38U (10.04%) and CapitaLand Ascendas REIT A17U (10.01%).
In fifth place is another Mapletree REIT: Mapletree Industrial Trust ME8U (10%). Keppel DC REIT (9.9%), Frasers Logistics & Commercial Trust BUOU (9.4%) and Suntec REIT (6.54%) round out the top eight constituents.
See also: Syfe drops Starhill Global REIT from REIT+ portfolio, adds OUE REIT
‘Strong comeback’
S-REITs staged a “strong comeback” in 3Q2024, says Syfe in its email, fuelled by the US Federal Reserve's “decisive move” to cut interest rates last week. “This change in monetary policy has created a more favourable backdrop for S-REIT investors, leading to a surge in interest and record inflows in the second half of the year. Consequently, the iEdge S-REIT Leaders Index saw an impressive gain of over +16% in 3Q2024.”
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Syfe claims that its REIT+ portfolio delivered 17% in returns for the quarter till Sept 24, with a year-to-date performance of +3.5%.
The company also claims the REIT+ portfolio has “consistently outperformed” its benchmark, the iEdge S-REIT Leaders Index. “Since its inception in April 2020, REIT+ has achieved a cumulative excess return of +5.4%.”
Staying optimistic
Despite the strong rally witnessed over the past two months, Syfe says it remains optimistic about the upside potential of S-REITs.
“We are at the beginning of a rate-cutting cycle, with interest rates expected to continue on a downward trajectory,” says Syfe. “The Fed cut its key interest rate by 50 basis points, bringing it down to a range of 4.75% to 5%. Fed policymakers currently forecast the benchmark rate to fall to 4.4% by the end of 2024, and further to 3.4% by the end of 2025.”
Lower interest rates will boost S-REITs’ earnings, adds the company. “Reduced financing costs translate directly into higher earnings growth for REITs. Moreover, the improved debt and capital environment is likely to facilitate acquisition activities, opening additional avenues for earnings expansion.”
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In addition, Syfe anticipates that institutional interest will return. “The distribution yield of the i-Edge S-REIT Leader Index offers a dividend yield close to 6%. This is a significantly higher yield than other yield-generating instruments, with 10-year government bonds currently yielding 2.5%. This attractive yield spread is expected to draw institutional investors back to the S-REIT market.”
Launched in partnership with the Singapore Exchange S68 in 2020, Syfe REIT+ is an “optimised portfolio of the 20 most well-known Singapore REITs”, says the company. Since April 2020, Syfe users have been able to choose either a portfolio made up of purely S-REITs, or a risk-managed portfolio that balances S-REITs with government bonds.
Instead of fully replicating the iEdge S-REIT Leaders index, Syfe says it uses an optimisation process to construct an index-tracking portfolio.
Its selection focuses on S-REITs that are Singdollar-denominated, liquid and backed by a decent market capitalisation and reputable management teams, says Syfe.
The optimisation process, especially the exclusion of US dollar-denominated REITs such as Manulife US REIT, has contributed to the outperformance of Syfe REIT+ portfolios, says Syfe.
Tables: Syfe
