Singapore Market

Quick Thoughts On Syfe REIT+ Rebalancing (Sep 2022)

Calvin Lo

Syfe just updated via email about a rebalancing of REIT+ portfolio in line with the semi-annual review of iEdge S-REIT Leaders Index this month.

Below is the updated REIT+ constituent list based in weighting as of 14 Sep 2022.

Source: Syfe email broadcast

Notable changes

  • Addition of Far East Hospitality Trust and SPH REIT following the merger of MCT and MNACT to create MPACT effective 21 July 2022.
  • Reduction in weights of Industrial REITs, e.g. Ascendas REIT (to 10% cap), MIT, Keppel DC REIT, ESR REIT, AIMS APAC REIT. Logistics REITs weights were maintained.
  • Increase in weights of Retail, Hospitality and Office REITs, e.g. Keppel REIT, FCT, ART, Lendlease REIT.

Rebalancing methodology

Digging a little bit into the methodology to help understand the how the rebalancing of the iEdge S-REIT Leaders Index is done, here are the steps:

  • Constituents are first weighted by free-float market cap
  • Then, a liquidity enhancement is performed where constituents are assigned an adjustment/modifier according to its liquidity
  • Thereafter, constituents weights are capped at 10%
Source: SGX

My thoughts

  • Seems to be a rotation from Industrial REITs which were pandemic beneficiaries to Retail, Hospitality, and Office REITs as the economy reopens and normalises.
  • Higher weights might not just be due to market cap increase but could also be because of better liquidity, i.e. more actively traded.
  • This rebalancing seems to reflect well the current market situation as we move past the pandemic, and the economy reopens and cross-border travel resumes.
  • Syfe REIT+ is thus well-positioned to benefit as movement restrictions ease, economic activity picks up, people go out shopping/dining more, and workers return to office.
  • Macro risks remain of course. The primary one being inflation and rising interest rates, which would result in higher borrowing costs for debt-dependant REITs. Hopefully, REITs will be able to balance those out with increasing rental revenues.

Checked my Syfe account, seems like the rebalancing was already performed as of 22 Sep 2022.

Read also my Syfe REIT+ review.

If you’re interested to sign up for a Syfe Wealth or Syfe Trade account, you can use my referral code SRPT47KQL or link here to enjoy up to 6 months of fees waived (Syfe Wealth) or $10 cash credit (Syfe Trade).

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