Syfe REIT+ Portfolio Review – 10x better than a REIT ETF? And Promo Code!

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So Syfe launched their Syfe REIT+ Portfolio back in February 2020. It’s basically a low cost robo solution for S-REITs. I heard a lot of good things about them, so I was really excited to take an in depth look.

Basics: What is the Syfe REIT+ Portfolio? (Promo Code at the end of the article)

From the Syfe website:

This portfolio is designed for investing in Singapore REITs with the advantage of dynamic risk management by ARI (Automated Risk-managed Investments) to achieve the relatively higher yields of holding REITs balanced against a moderate risk target (Morningstar target risk category).

Return and risk

If you held this portfolio for the last 10 years then you would have seen an annualized return of 9.9% and an average dividend yield of 5.2% over the last 5 years.

Our ARI strategy reduces the risk of holding a 100% REITs portfolio by judiciously diversifying with Singapore government bonds and quasi government bonds in times of market turmoil.

Underlying ETFs

The REIT portion of your portfolio comprises of 15 high quality Singapore listed REITs which includes Mapletree, Ascendas, Capitaland and others. The bond portion is invested into the ABF Singapore Bond Index Fund ETF that provides access to one of the world’s highest-yielding AAA-rated government bonds.

I always hate walls of text like that, so I’ll just break it down:

  • Syfe REIT+ is a robo solution for S-REITs and Bonds (think StashAway, but replace the ETFs with S-REITs and Bonds)
  • They use blue chip S-REITs with a strong focus on Singapore, and they use high grade Singapore bonds (mostly from the Singapore government)
  • They layer a rebalancing system on top of it that looks like it’s tied to market volatility (VAR strategy – but more on this later)

Portfolio Composition

I’ve set out the portfolio composition of Syfe REIT+ (top) vs Lion Global REIT ETF (bottom).

Main difference is that Syfe REIT+ has a big emphasis on industrial properties. I see a lot of industry reports (especially DBS) telling me that industrial is the “safest” REIT asset class right now. I’m not so sure if I agree with that, because lots of SMEs are going to face huge problems in the coming months. But that’s a topic for another time. What we need to know is that Syfe REIT+ has a strong tilt towards industrial properties, whether you like it or not.

They don’t seem to follow any set rules for the REIT selection (unlike Lion Global REIT ETF which follows an underlying index), so this could be both good or bad. Good if the guy picking the REITs did well, bad if the guy did badly.

The top holdings for Syfe REIT+ (top) vs Lion Global REIT ETF (bottom) is set out above.

Observations:

  • Syfe REIT+ has a very strong emphasis on Singapore properties. Their assets are primarily located in Singapore
  • Syfe REIT+ has a big focus with REITs with big market caps and a good sponsor. Notice they only pick the brand name REITs like CapitaLand, Mapletree, Frasers etc, and they primarily use those with Singapore assets.

By contrast, Lion Global REIT ETF is far more diversified across REITs, and across geographies.

There’s no right or wrong here, it just depends on what you want. If you want a broad, diversified REIT selection, Lion Global REIT ETF (or the Nikko AM REIT ETF) is the better one. If you want to go with safe, big cap, strong sponsor, Singapore focused REITs, Syfe REIT+ is good.

If you’re wondering how Syfe handles rights issues from REITs, I’ve checked with them, and this is their response:

Regarding rights issues, we will automatically help our investors subscribe to all rights issues and the associated benefits will be passed on to them. The funds will come from the cash component in the REIT+ portfolio (on average 2% to 3% is buffered for the cash component).

Rebalancing

Regular readers of Financial Horse know that I hate automated rebalancing. Syfe REIT+ has:

Automated Risk-managed Investments (ARI) is our proprietary investment methodology, combining the best of two leading approaches – Global Market Portfolio (GMP) and Risk Parity Portfolio (RP).

They also have this very nice chart that shows you how the rebalancing would be done over the big financial events over the past few years.

The only catch? Syfe REIT+ was launched in February 2020, so the entire chart above is probably backtesting.

And of course, your response is that: “But FH, backtesting means nothing because any monkey can build a model that performs well over the past 100 years, but that doesn’t mean this model performs well in the next 100 years”. And I completely agree.

Interestingly, we actually have an opportunity to watch how the rebalancing algorithm works in the real world, because Syfe REIT+ released this nice article for us showing how Syfe REIT+ did the past few weeks:

In other words, Syfe REIT+ rebalancing actually reduced the losses the past week or two.

I dug around a bit more, and it generally looks like their rebalancing is triggered by Value at Risk (Risk). For those who are newer to investing:

Value at risk (VaR) is a measure of the risk of loss for investments. It estimates how much a set of investments might lose (with a given probability), given normal market conditions, in a set time period such as a day.

VAR itself is then determined by looking at historical data.

So when volatility in the market goes up, VAR based strategies will sell. When volatility drops, VAR based strategies will buy.

For the record, I don’t know if Syfe REIT+ actually uses a VAR based strategy, it’s just my theory at this stage. So feel free to correct me if I am wrong.

Are VAR based strategies good?

Whether VAR based strategies are good is a massive debate now. Volatility in markets has soared, so all players on VAR based strategies have been forced to derisk, further contributing to volatility.

In fact, almost all the big banks and hedge funds out there (or at least a large proportion of them) use VAR based strategies to monitor risk. This can be risky because it leads to herd mentality, where everyone in the market monitors the same signals, and sells at the same time.

My take on this?

I think for the beginner investor, a VAR based derisking is probably better than none. It *may* provide some outperformance over a simply buy and hold strategy.

But for more advanced investors, I would want to at least have the option to disable the rebalancing. The last thing I want is for Syfe REIT+ to sell my REITs at a bottom if volatility suddenly spikes, and buy them back at a top when volatility drops.

Unfortunately, as it stands, this option is not available. You need to take the Syfe REIT+ portfolio as it stands:

Your Syfe REIT+ portfolio allocation is determined by our ARI strategy, which uses advanced risk management to reduce the risk of your REIT+ portfolio. Changing the underlying S-REITS or their allocation would affect your portfolio’s risk profile and may negatively impact your returns over time. As such, we currently do not allow customization of the REIT+ portfolio.

There’s a pretty good exchange between a user and the Syfe CEO on this topic:

Historical Returns

Historical returns mean nothing because the past 10 years and the next 10 years are completely different.

Some people swear by it though, so for those of you, here are the historical returns. Long story short, REITs have had a great 10 years in an unprecedented era of easy central bank liquidity, that buoyed global asset prices (including real estate).

Does this continue the next 10? That’s a topic for another day.

Fees

 

Syfe REIT +

REIT ETF

Endowus

StashAway

Platform Fee

0.65% – Up to $20,000

0.5% – Up to $100,000

0.4% – $100,000 and more

 

Tiered:

0.60% – Up to S$200,000

0.50% – S$200,001 to S$1,000,000

0.35% – S$1,000,001 to S$5,000,000

0.25% – S$5,000,001 and above

Stacked (not tiered):

0.8% – Up to $25,000

0.7% – $25,000 to $50,000

0.6% – $50,000 to $100,000

0.5% – $100,000 to $250,000

0.4% – $250,000 to $500,000

0.3% – $500,000 to $1,000,000

0.2% – Above $1,000,000

Fund Expense

NA

0.54%

0.43% to 0.79%

0.2% – 0.4%

Total (Assuming a S$100,000 portfolio)

0.4%

0.54%

1.03% to 1.39%

0.875% to 1.075%

 

Fees for Syfe REIT+ are set out above, benchmarked against Lion Global REIT ETF, StashAway (uses ETFs), and EndowUs (uses managed Funds).

To be honest, the fees are actually really competitive. If you’re investing $20,000, you’re paying 0.5%, which is even lower then Lion Global REIT ETF. At $100,000, this drops to 0.4%.

So yeah, to give credit where credit is due, I think the fee structure is actually really attractive.

Liquidity (Syfe REIT+ vs Traditional REIT ETFs)

The other thing I wanted to add is liquidity. The main competitor for Syfe REIT+ is going to be a REIT ETF like Lion Global REIT ETF. And those ETFs have abysmal liquidity. Daily trading volume is really bad.

The good thing about Syfe REIT+, is that because they buy the underlying REITs directly, liquidity is less of an issue, and there’s less need to worry about bid-ask spreads.

This to me, is a real value add of Syfe REIT+, and one that makes it more attractive than REIT ETFs in my book.

My take on Syfe REIT+

To be honest, I think Syfe REIT+ is a very decent option for beginner investors.

I like that:

  • Blue Chip REITs from great sponsors and Singapore assets – They stick to blue chip REITs with a strong emphasis on Singapore properties, because this reduces risk drastically. It does reduce potential returns though, so it may not be suitable for those looking for higher yield.
  • Liquidity – They invest directly in the underlying REITs, to increase liquidity.
  • Fees – Fees are really competitive.
  • Easy way to build a diversified REIT portfolio – Many beginner investors have only a few thousand to put into markets, and with such sums it’s not cost effective to DIY your own portfolio due to transaction fees. For those investors, Syfe REIT+ could be a great option.

What I don’t like, is:

  • VAR based rebalancing – Again, this is probably good for beginner investors. But for more advanced investors, the option to disable auto rebalancing, and the option to up and decrease REIT allocated based on my own decision making, would be fantastic. I get why they don’t have this feature for now though – probably increases costs of implementation, but I would really like to see this introduced down the road.
  • Blue Chip REITs from great sponsors and Singapore assets – The same plus point above, can also be a minue for certain investors. If you want to go with high yield products, or if you want to allocate to countries outside Singapore, or you want to tweak your allocation to focus more on retail for example, Syfe REIT+ can’t do it for you. You basically just have to take the portfolio as it is. In the coming paradigm shift in investing, I expect active investing to start to outperform passive investing again, so this could count against Syfe REIT+ if you’re a sophisticated investor.

Promo Code

Syfe REIT+ also very kindly reached out to offer readers of Financial Horse a fantastic promotion!

Promo Code is “FHBONUS”, and you get:

$10 bonus for the first deposit above $500.

$50 bonus for the first deposit above $10,000.

$100 bonus for the first deposit above $20,000.

To enjoy the promotion, clients will have to be new users of Syfe and keep their initial deposit with Syfe for at least 6 months. The bonus is applicable on the first deposit made only. Clients will receive the bonus after 5 working days of their initial transfer and it will be automatically credited to their portfolio and invested along with their existing investments.

What do you think about Syfe REIT+? Wil you invest with them? Share your comments below!


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9 COMMENTS

    • They’re tough to analyse because the underlying securities are basically a black box. Not financial advice of course, but my view is that they should be ok for now because of the securitisation structures and priorities in place. Even in 08 the highest tranche never defaulted. But of course, this view can change on a dime if there’s a material deterioration in the virus situation.

  1. Why isn’t huge 1 trillion dollar stimulus working on the markets? Doesnt that address ur 2nd signpost for stocks to bottom?

    • Will share more thoughts on Saturday. Here’s what I wrote for a Patron member in the meantime:

      Hi XXX,

      That’s an amazing question. Just my thoughts of course, I could be wrong, and my thoughts are very fluid at this stage, but:

      1) Not yet, but we’re getting close. I may treat Signal 1 as triggered once it happens, because too many people will frontrun the signal now.

      2) Not yet, but it’s a good start. I think 3trillion from US will start to move the needle, but it must first be PASSED. Bipartisan politics is a big mess.

      3) I think SG and US buy signals can be the same, with China following a different buy signal.

      4) I think the bigger problem now is USD liquidity in the financial system. If left unchecked, it will blow up the global economy. So there may be another factor to monitor now. I will share more thoughts on Saturday.

      Hope this helps your decision making!

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