ENHANCED REIT ETF FOR THE ASIA PACIFIC EX JAPAN MARKET

Abstract

This study investigates how the returns of the Phillip SGX APAC Dividend Leaders REIT ETF can be enhanced. To do so, three scenarios are investigated, namely quarterly rebalancing instead of semi-annually, rebalancing on the review date instead of the fourth Monday of that month, and setting a minimum constituent weighting of 1.50%. The study found that all 3 methods delivered superior returns as compared to the existing Phillip SGX APAC Dividend Leaders REIT ETF. This is attributable to the ETF being more responsive to the market in the first two scenarios, and larger REITs being able to deliver greater returns than small constituent REITs. With this finding, an enhanced REIT ETF that is essentially an amalgamation of all three scenarios was constructed. The enhanced REIT ETF was able to surpass the existing REIT ETF and all the 3 reconstructed ones and the base REIT ETF during various market conditions. Thus, the enhanced REIT ETF is more optimal for investors and can be expected to deliver a lower degree of tracking error.