Lion-Phillip S-REIT ETF

[cyclone]

Lion-Phillip S-REIT ETF commences IPO at $1 per unit

By: Michelle Zhu
02/10/17, 01:10 pm

SINGAPORE (Oct 2): Asset management companies Lion Global Investors and Phillip Capital Management have announced the launch of their jointly-owned and managed exchange-traded fund (ETF), Lion-Phillip S-REIT ETF with an initial public offering (IPO) of $1 per unit.

The fund intends to declare dividends every Feb and Aug, and will conduct rebalancing semi-annually in June and Dec.

Its IPO opened this morning at 9am, and will close on Oct 20 at 11am.

Lion Global Investors and Phillip Capital Management are the manager and sub-manager of the fund, respectively.

In a joint release issued on Monday, the two entities say their new fund represents Singapore’s first ETF to solely focus on Singapore Real Estate Investment Trusts (S-REITs), with 23 S-REITs as at end-Aug.

More details in https://www.theedgesingapore.com/investi...ipo-1-unit

[tanjm]

I took a quick look.

The first thing I noticed was the lack of a indicative yield - which was weird (does MAS allow this? or did I miss it).

The second was the paragraph below on page 49 under "Taxation of the Fund" section in the prospectus. The non-designated income section is rather long but it seems to exclude REIT income. Therefore, am I right to conclude that holding the ETF will suffer a loss of income equal to 17% of the underlying dividends plus the fund fee of 0.5%?

quote from prospectus:
"Taxable income distribution from Real Estate Investment Trusts (“REITs”) listed in Singapore derived by the Fund will generally be subject to tax withheld at source at the prevailing income tax rate, currently 17%. Such taxable income distribution derived by the Fund is a non-Designated Income and will be subject to tax at the prevailing income tax rate, currently 17%, which could be offset by the tax withheld at source. The gains or profits derived by the Fund from the disposal of units in REITs listed in Singapore are Designated Income."

[money]

I took a quick look.

The first thing I noticed was the lack of a indicative yield - which was weird (does MAS allow this? or did I miss it).

The second was the paragraph below on page 49 under "Taxation of the Fund" section in the prospectus. The non-designated income section is rather long but it seems to exclude REIT income. Therefore, am I right to conclude that holding the ETF will suffer a loss of income equal to 17% of the underlying dividends plus the fund fee of 0.5%?

quote from prospectus:
"Taxable income distribution from Real Estate Investment Trusts (“REITs”) listed in Singapore derived by the Fund will generally be subject to tax withheld at source at the prevailing income tax rate, currently 17%. Such taxable income distribution derived by the Fund is a non-Designated Income and will be subject to tax at the prevailing income tax rate, currently 17%, which could be offset by the tax withheld at source. The gains or profits derived by the Fund from the disposal of units in REITs listed in Singapore are Designated Income."

I havent read it but assuming that the dividends are subjected to tax of 17%, this is not going to be interesting. Alllow me to do some simple math.

Assume that the ETF trades close to NAV, so at $1.00, each share will collect dividend of say 6% earned on the underlying reits holding, taxation on this $0.06 amounts to $0.0102, approximately 1.02%

Add the tax to the fund fee, the annual expense is at least 1.52%. I feel that this is significant in the name of diversification. An investor with 50k would do better to select 5 reit (less leveraged or a good sponsor) than to invest in this ETF.

An investor with 200k can mimic this ETF to save on the annual expense of 1.52% and at the same time have good diversification.

[tanjm]

I took a quick look.

The first thing I noticed was the lack of a indicative yield - which was weird (does MAS allow this? or did I miss it).

The second was the paragraph below on page 49 under "Taxation of the Fund" section in the prospectus. The non-designated income section is rather long but it seems to exclude REIT income. Therefore, am I right to conclude that holding the ETF will suffer a loss of income equal to 17% of the underlying dividends plus the fund fee of 0.5%?

quote from prospectus:
"Taxable income distribution from Real Estate Investment Trusts (“REITs”) listed in Singapore derived by the Fund will generally be subject to tax withheld at source at the prevailing income tax rate, currently 17%. Such taxable income distribution derived by the Fund is a non-Designated Income and will be subject to tax at the prevailing income tax rate, currently 17%, which could be offset by the tax withheld at source. The gains or profits derived by the Fund from the disposal of units in REITs listed in Singapore are Designated Income."

I havent read it but assuming that the dividends are subjected to tax of 17%, this is not going to be interesting. Alllow me to do some simple math.

Assume that the ETF trades close to NAV, so at $1.00, each share will collect dividend of say 6% earned on the underlying reits holding, taxation on this $0.06 amounts to $0.0102, approximately 1.02%

Add the tax to the fund fee, the annual expense is at least 1.52%. I feel that this is significant in the name of diversification. An investor with 50k would do better to select 5 reit (less leveraged or a good sponsor) than to invest in this ETF.

An investor with 200k can mimic this ETF to save on the annual expense of 1.52% and at the same time have good diversification.

Actually, it is even more interesting than that. What if I go long the component stocks and short the ETF? This is worthwhile if short funding is less than the dividend gap + fee gap.

[Temperament]

"An investor with 200k can mimic this ETF to save on the annual expense of 1.52% and at the same time have good diversification."

Before i reach reading this sentence, i have been thinking about it.

In fact i always think in this way.

Why pay anyone if we can do it our self - mimic.

Actually not necessarily exactly the same.

[ACTIVIST SPEAKS]

To convert a tax-free structure into a taxable distribution is just plain silly. And to pay an extra layer of management fee to obtain diversification of a mere 23 s-reit is just ridiculous. Like the guys here say : Just do it yourself if you want such a diversification.

[WH Cheng]

I believe this REIT is to help those investors who DO NOT know how to invest into REITs. All that has been written in the above are for pros like you guys here,.. So,.. if these people do not know,... then pay some fees, pay some taxes, and still get REIT returns,...

Seasoned 'REITers' will go directly into the REITs by themselves.

The other possibility for buying this fund is to hope for capital gain,... after all, inexperienced investors will probably throw everything into this new vehicle.

[ghchua]

The problem with investing in REITs individually is frequent corporate actions like rights issues, preferential offers, scrip dividends, takeover offers etc. For those who wish to avoid the hassle with dealing with corporate actions, a REIT ETF might be a useful alternative.

These two months alone, I have already encountered cash calls from Cache Logistics Trust, MapleTree Logistics Trust, Manulife US REIT and CapitaLand Commercial Trust!

[Temperament]

Cash calls or private placements is how a REIT stay "relevant" more than any other type of companies.

The problem is always is the operation yield accretive or other wise - Reit or any company?

Sometimes, i do apply for right issues without owning any of the mother share.

Too free what?

[weijian]

To convert a tax-free structure into a taxable distribution is just plain silly.  And to pay an extra layer of management fee to obtain diversification of a mere 23 s-reit is just ridiculous.  Like the guys here say :  Just do it yourself if you want such a diversification.

Lion Global Investors owned by Great Eastern and OCBC - so one can expect "cross selling" to happen from their parents - that's how synergies are created!


It looks "in thing" for some of the local non-bank players to get into fund management, since "AUM" is so sexy - We have had Philip Capital, Straits Trading as the managers and even SGX proving an index recently.

http://www.sgx.com/wps/wcm/connect/eccd3...9abb5432d5