ETF Investment Returns – What you see is not what you get.

It has been almost a year since the inception of the first ETF that focuses on S-REITs – Lion-Phillip S-REIT ETF, and Phillip is celebrating the anniversary by introducing another ETF – Phillip SING Income ETF. 

According to the brochure, Lion-Phillip S-REIT ETF aims to offer sustainable income stream and portfolio diversification while Phillip SING Income ETF aims to deliver stable and quality income for investors according to the website.





Lion-Phillip S-REIT ETF

SGX Observer attended one of the introductory seminars a year ago when Lion-Phillip S-REIT ETF was launched for subscription.

According to the brochure, the ETF offers:

  • Low-cost exposure to S-REITs in one fund
  • Diversification for your investment portfolio
  • Passive income and potential capital growth for your investment portfolio.

The ETF is meant to replicate the performance of “Morningstar® Singapore REIT Yield Focus Index”, as the index is designed to screen for high yielding Real Estate Investment Trusts (“REITs”) with superior quality and financial health.

The 2 most asked questions during the seminar were

  1. Why the 23 REITs and not others (as the ETF didn’t include some of the big cap S-REITs) and
  2. impact of Fed rate hike to S-REITs.

SGX Observer is not a fast learner. What’s left in the mind of SGX Observer after the manager/speaker’s explanation for question 1 is:  “…. the index (Morningstar® Singapore REIT Yield Focus Index) is based on very complicated formula…. takes multiple factors into consideration…. went through many many rounds of back-testing and fine-tuning…. and you can read the index methodology paper at Morningstar’s website for the details.”.  

Nevertheless, SGX Observer understand that this is not something that can be explained and understood by the attendees during the seminar even if the manager spend the next hour on this.

For question 2, Phillip Securities Research has subsequently published a report on the 10 most commonly asked questions on REITs highlighting that S-REITs managed a CAGR of c26.5% during the last rate hike cycle in 2004 – 2006 (link).




Lion-Phillip S-REIT ETF Fund Performance

According to the fund information report published for Jan 2018 and Aug 2018, an observation is that the benchmark index performed better than the ETF most of the time, and the +7.7% returns in just 3 month since inception is eye-catching.

As at 31-Aug-2018, despite the negative 2.6% year-to-date returns, it still clocked a +3.0% return since inception. 

Lion-Phillip S-REIT ETF Fund Perfomance (31-Jan-2018)

Lion-Phillip S-REIT ETF Fund Perfomance (31-Aug-2018)

In the quarterly update report for September 2018, it highlighted the Gross current dividend yield of 5.3% under key facts according to data as at 28-Sep-2018, but with a footnote. 

Lion-Phillip S-REIT ETF Quarterly Report (Sep 2018)

According to SGX website:

  • Dividend paid on 16 Mar 2018 = S$0.0168. 
  • Dividend paid on 28 Sep 2018 = S$0.0130 + S$0.0010 + S$0.0040 = S$0.0180
  • Total dividend paid in 2018 = S$0.0168 +  S$0.0180 = S$0.0348
Lion-Phillip S-REIT ETF Dividends 




Unfortunately the ETF was traded near its lowest range this week and closed at S$0.973 today (5-Oct-2018).

Initial investment
ETF Market Value
Dividend received
Investment Return %
(since inception)
Indicative Dividend Yield 

Hmmm… return of 0.78% after 11 months. 🙁

If we use the closing price as of 28-Sep-2018 – S$0.990 for calculation: 

Initial investment
ETF Market ValueDividend received
Investment Return %
(since inception)
Indicative Dividend Yield 

Well, returns of 2.48% is definitely much better than 0.78%. 😏

BUT … 

… didn’t we just saw the Sep 2018 quarter report stated 5.3% dividend yield according to data as at 28-Sep-2018 too?  🙄




Taking a closer look of the key facts, it is Gross Current Dividend Yield of 5.3%, and according to the footnote (which is 3 pages away), the “Gross” “current” dividend yield is Based on the weighted average 12-month trailing dividend yield of the underlying S-REITs as at 28 September 2018.  😐


🤦🏻‍♂️  what you see = 5.3%, what you get = 2.48%. 🤷🏼‍♂️

– “Gross” Current Dividend Yield as at 28-Sep-2018

Note that the “Gross current dividend yield” is the only dividend yield figure mentioned in that ETF report.





What about the return stated in the fund information reports we saw earlier?

To recap, these are the numbers we saw.

Return %Since Inception
(as at 31-Jan-2018)
Since Inception
(as at 31-Aug-2018)
S-REIT ETF7.73.0

SGX Observer extracted the ETF historical trading price for the 2 dates: 

Lion-Phillip S-REIT ETF Closing PriceDividend ReceivedTotalReturns %
(received on 16-Mar)
  • Returns as at 31-Jan-2018 is 7.7%. ✅
  • Returns as at 31-Aug-2018 is 1.28% instead of 3.0%.  🤔

Again, footnote plays the magic: Returns are based on NAV-NAV basis and assuming all dividends are reinvested net of all charges payable upon reinvestment.

But… the NAVs are actually lower than the last traded price on these 2 dates. 

Lion-Phillip S-REIT ETF NAVDividend ReceivedTotalReturns %
(received on 16-Mar)
  • Returns by NAV as at 31-Jan-2018 is 7.5%. ❌

…. and there is no dividend issued by the ETF for reinvestment prior to 31-Jan-2018.  🤷🏼‍♂️

( unless the dividends here refer to the dividends of underlying S-REITs received by the ETF ?!  😯 )

( SGX observer thought the dividends of underlying S-REITs received by the ETF are meant for paying to ETF holders as dividends instead? 🤯 )




Nevertheless… the keyword in the footnote is “…assuming all dividends are reinvested…”.

i.e. the ETF didn’t reinvest the dividends in actual. 

i.e. the figure of return % is not actual, despite it is based on NAV.

🤦🏻‍♂️  … what you see = 3.0%, what you get = 1.28%. 🤷🏼‍♂️

– ETF Fund performance as at 31-Aug-2018



🤦🏻‍♂️  … what you see = 3.7%, what you get = 1.28%. 🤷🏼‍♂️

– Benchmark index performance as at 31-Aug-2018




There is one more important fact to note – 

Recall the 2 rounds of dividend distributions

  • 1st distribution of S$0.0168 paid on 16-Mar-2018.
  • 2nd distribution of S$0.0180 paid on 28-Sep-2018.

While the 2nd distribution is seen as an ‘improvement’ by paying S$0.0012 more than the 1st, it is important to know that S$0.0010 out of it is actually distribution of capital and not distribution of dividend.

i.e. if you’ve invested S$10,000 in the ETF since inception, the ETF is returning your S$10 and effectively your invested amount is now S$9,990. The S$10 is not an investment gain. It is from your own pocket. 




SGX Observer’s take: 

Footnotes are as important as the key notes. 🙄

One shall set realistic expectation prior to making any investment decisions. 🤓





p/s: ‘ETF’ in the title refers to all the ETFs available in the market in general. Lion-Phillip S-REIT ETF is just the example used to illustrate the key points here. 

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