I don’t remember having written much reviews outside of AutoWealth. My Syfe review would be a good start, I suppose.
Skin in the game, as always – I don’t share any product or service that I don’t personally use.
My long-term goal is to shift my focus to passive investment instead of DIY stock-picking. Despite having fun in the process and doing well enough to out-perform STI ETF, I believe that my time would eventually be put to better use.
The idea is for my globally diversified, passive index portfolios – AutoWealth (Cash) and Endowus (CPF) – to form the basic core. Complimentary portfolios such as REITs, be it DIY picks or robo-advisors, would be the add-ons.
I promise that there would probably be a few nuggets of information in this Syfe REIT+ review that is seldom covered by others.
Let’s dive in, shall we?
Syfe REIT+ portfolio creation
Syfe offers three options for their portfolios and you can see what the three of them are in the screenshot below –
- Global ARI portfolio
- REIT+ portfolio
- Equity100 portfolio
Since this blog post is about my REIT+ portfolio, I went ahead and clicked on REIT+ portfolio followed by next.
I had named my Syfe REIT+ portfolio “Yield Cushion” (Yield Shield + Cash Cushion) as a shout-out to Millennial Revolution.
An interesting point to note is that there is an option for 100% REITs, and another for REITs with Risk Management. This wasn’t obvious to the user from the beginning.
Risk Management basically refers to the ARI (or Automated Risk-managed Investments) strategy that is Syfe’s proprietary investment methodology, combining the best of two leading approaches – Global Market Portfolio (GMP) and Risk Parity Portfolio (RP). If you want to dig deeper, check out Syfe’s website for their write-up.
The dashboard shows the main information about Syfe REIT+ portfolio that they want to convey to you, the investor.
In the screenshot, Risk Management was selected and therefore, 50% of the portfolio composition is currently in bonds – ABF Singapore Bond ETF (A35) with reference to the current global situation.
Other information includes past returns and historical yields.
Pretty simple, right?
Why track the iEdge S-REIT Leaders Index?
The current Syfe REIT+ portfolio is an easy way to invest and track the iEdge S-REIT Leaders Index.
On 20th July 2020, Syfe updated their portfolio to reflect the new changes to their portfolio. This was because SGX has announced a change to the methodology and name of its iEdge S-REIT 20 index (old) which took effect at the close of 17 July 2020. New – iEdge S-REIT Leaders Index.
The iEdge S-REIT Leaders Index is a narrow, tradable, adjusted free-float market capitalisation weighted index that measures the performance of the most liquid real estate investment trusts in Singapore in SGD.
It is part of a suite of equity indices designed to capture Singapore’s Real Estate Investment Trust (REIT) market segment by measuring the performance of eligible REITs listed on SGX.
Source – Singapore Exchange Limited
When I looked closer at SGX’s website, I noticed that there were two separate REITs indexes –
- iEdge S-REIT Index
– constituents are weighted by free-float market capitalisation.
- iEdge S-REIT Leaders Index
– a liquidity enhancement is performed. Based on the daily traded velocity (as measured in the Liquidity Screening), constituents within each quartile are assigned an adjustment factor on their respective free-float market capitalisation.
Why choose one over the other then? It boils down to two key differences.
First of all, the Leaders Index covers the largest and most tradable REITS in Singapore. Syfe believes that investors are more likely to prefer this distinction.
Secondly, by selecting the iEdge S-REIT Leaders Index, Syfe’s aim is to balance market representative-ness as well as trading liquidity. Needless to say, trading liquidity directly impacts trading costs and therefore portfolio performance.
1) But iEdge S-REIT Leaders Index has 26 REITs
If you are detail-oriented (see factsheet), you would have noticed that there are 26 REITs that fulfill the iEdge S-REIT Leaders Index criteria.
From Syfe’s robo-advisory perspective, they would have to balance fully replicating the index (i.e. buying all the constituent REITs in the Index) against building an optimized basket using a substantial portion of the index constituents with an eye on the portfolio’s tracking error to the benchmark index.
Therefore, Syfe has chosen not to include all 26 REITs within the index. Instead, they have used an optimized portfolio of 20 REITs with a tracking error of <0.5% p.a. to the Leaders Index. This means that despite having only 20 REITs in your portfolio, your returns would still be extremely close to that of the Leaders Index.
If you don’t find this piece of information anywhere online, it is because I had learnt it via email correspondence with Syfe. As we would see later, these interesting points play an important role in determining the portfolio composition.
2) Liquidity adjustment factor
Now, the fun part!
The idea behind Syfe’s REIT+ portfolio isn’t as “passive” as one might think. To be clear, the methodology is passive – it seeks to replicate the performance of the SGX iEdge S-REIT Leaders Index.
It is the index itself that is doing the “interesting” stuff, and you would miss it if you don’t bother reading the index methodology. Yes, of course I would think that you should probably take a look at it if you’re investing with Syfe REIT+.
In the documentation, it is stated that a liquidity enhancement is performed. Remember what I wrote earlier?
For the 26 REITs in the Leaders Index, the first 7 (or 6) would have an adjustment factor of 1.0 and the subsequent quartile would have an adjustment factor of 0.75, and so on.
But, recall that our Syfe REIT+ portfolio has only 20 REITs, how does that work? I would imagine the 20 REITs would look something like this –
- First 7 – [1.00] adjustment factor
- Next 6 – [0.75] adjustment factor
- Next 7 – [0.50] adjustment factor
- Next 3 – [0.25] adjustment factor
If you are an existing investor of the Syfe REIT+ portfolio and the composition doesn’t quite make sense to you, now you have a better idea why.
3) Capping at 10%
Remember that the Leaders Index is being replicated, so it makes sense to understand how the Leaders Index is constructed.
This is pretty straight-forward. Even if the largest and most liquid REIT i.e. Ascendas REIT weightage exceeds 10% at the point of rebalancing, it will be limited to 10%. Your portfolio exposure to any single REIT would thus be limited to 10%.
Passive methodology is a must?
It has been no secret that when it comes to my choice of a robo-advisor, one of the key consideration is that of a fully passive investment approach. I have always been a proponent of the passive investment approach and the REIT+ portfolio fits perfectly because it is intended to track the iEdge S-REIT Leaders Index passively.
One would have thought that my REIT+ portfolio would, therefore, be 100% REITs, correct? If the portfolio was solely mine, of course, that would be the case.
Funny story – no, that isn’t the case! I selected the REITs with Risk Management option. The question is – why?
I had spoken to my wife and convinced her to invest a portion of her money into Syfe. Capital guaranteed by her husband, of course. Happy wife, happy life 🙂
So, this portfolio contains $10,000 from myself and $10,000 from my wife. After considering her appetite for risk and downside volatility, I had opt-ed for the REITs with ARI option. With the current global situation, 50% of my portfolio will be allocated to the bonds component in the form of ABF Singapore Bond Index Fund (A35).
Contrary to what some may think, this decision (to opt for ARI option) was entirely independent on Syfe’s ability to “outperform their respective benchmarks on a risk-adjusted basis”.
Clients tiers – Blue / Black / Gold
Depending on the portfolio size, clients qualify for different tiers – blue, black, gold and platinum which is included in the screenshot below.
While my initial investment was only $500, I was sufficiently impressed by the experience and subsequently increased our investment to $20,000 to take advantage of the lower management fees of 0.5% per year.
Dividend payout option? Black tier and above
One point that is seldom mentioned concerns the dividend payout option.
If you are an investor who is thinking of using the Syfe REIT+ portfolio as a way to obtain a source of passive income, you would be interested to note that dividends are re-invested by default.
The dividend payout (withdrawal) option is only available for black tiers ($20,000 portfolio size) and above.
Some thoughts at the end of my Syfe review
I like the fact that Syfe REIT+ portfolio is the only REITs-only robo-advisory investment product that also happened to be passive in nature.
The tracking error is very low at 44 basis points (bps) and it means that the closer the portfolio return will be to the index return.
With my $20,000 portfolio, management fee has been reduced to 0.5% per annum or $8.33 each month.
On top of that, I get to select the dividend payout option, get access to wealth advisors plus enjoy financial planning sessions if I wanted to.
To be honest, I don’t really care for any of that. All I really wanted was a passive approach to REITs investment. If these freebies appeal to you, then you’d be getting a lot more value out of Syfe than me!
With that, I hope that my Syfe REIT+ review would be of some help to you. At no extra cost to you, my personalized referral code – TURTLEINVESTOR – would give your Syfe portfolio a headstart when you decide to start an investment portfolio with them! Readers opening an account for the first time with Syfe can have their first $40,000 managed for free for 3 months – learn more here.
My on-going Twitter thread will continue to track my investment experience with Syfe – do check it out!
P. S. My third StocksCafe giveaway is ending in a day’s time! Take part if you have yet to do so! Endowus review, you say? Soon!
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Hello! I’m Kevin, Turtle Investor
At the age of 30, I am the personal finance blogger who laid claim to a negative net worth of minus $25,755.
Seven years later in 2019, I hit CPF Full Retirement Sum (FRS) of $176,000 without making a single cent of CPF top-up. More tidbits about myself here if you’re curious. My blueprint for financial independence can help give you a headstart in your own FIRE journey.
I am married to a lovely wife and that means dual income with no kids. In my free time, I chase miles so that we can fly in business class. My hobby is making pocket change off this blog and sharing everything I know with you!
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