$UOB APAC Green REIT ETF(GRN.SI)$
Why Invest?
- Diversified property holdings: The Fund seeks to invest in high quality and sustainable real estate across a wide range of sectors and markets. As of October 2022, the Fund’s Top Three sectors were retail, office, and diversified Real Estate Investment Trusts (REITs).
- Rising opportunities in Asia:The International Finance Corporation (IFC), a member of the World Bank Group, estimates that by 2030, the green buildings sector within Emerging Markets will see US$24.7 trillion in business investment, driven by the expansion of building construction and the increasing urgency to achieve carbon neutrality[1].
- Change in investor requirements: This Fund meets the growing requirement by institutional real estate investors to adopt investment strategies that are more resilient, can minimize systematic risks, and are future-proof.
- High demand for green buildings: According to Jones Lang LaSalle Incorporated (JLL), over 70 percent of corporate occupiers in Asia Pacific are willing to pay a rental premium to lease certified green buildings as part of efforts to meet their decarbonization goals[2].
- Capable of delivering positive total returns:The Fund aims to deliver both high dividend yield and capital gains by selecting real estate assets with both good rentals and growth potential.
One Month Portfolio Review
The investment objective of the UOB APAC Green REIT[3] ETF[4] (the “Fund”) aims to replicate as closely as possible, before expense[5], the performance of the iEdge-UOB APAC Yield Focus Green REIT Index (“Index”).
From its inception on 23 November 2021 to 31 October 2022, the Fund tracked the Index very closely with only very minor performance deviation that resulted from fees and initial deployment.
Annualised and Cumulative Returns
The Fund Net Asset Value (NAV) vs Index, 23 November 2021 – 31 October 2022
Source: UOBAM/Bloomberg, 31 October 2022
The Index outperformed its non-green peer S&P Asia Pacific REIT Index by 4.75 percent year-to-date (YTD).
Source: UOBAM/Bloomberg, 31 October 2022
Past performance is not necessarily indicative of future performance. Performance numbers are not annualized.
Market Review
Global equities bounced (MSCI All Country World Index: +4.5 percent in SGD terms) in October 2022 after a weaker US job opening triggered a rally on optimism of a US Federal Reserve (Fed) pivot. However, Asian equity markets slumped (MSCI All Country Asia Pacific Index: -3.4 percent in SGD terms) weighed down by China/Hong Kong markets after US President Biden’s administration announced new restrictions on China’s access to US semiconductor technology. The 10-year US Treasury (UST) yield rose 22 basis points (bps) to 4.05 percent in October 2022. Metals prices were mixed but energy prices reversed the downward trend (Gasoline price: +13.7 percent, Brent oil price: +7.8 percent) following the announcement of the Organization of the Petroleum Exporting Countries (OPEC) production cuts amid already tight supply.
Japan is set to lift its international border restrictions for foreign tourists effective 11 October 2022. This includes the resumption of its visa-waiver programme which was suspended in March 2020 and individual travel. The Bank of Japan (BOJ) maintained its ultra-loose monetary policy and reiterated its dovish stance in October 2022, fuelling continued weakness in the Japanese yen.
The Reserve Bank of Australia(RBA) raised its cash rate by 25bps to 2.6 percent, lower than the market expectation of a 50bps hike. The market interpreted the RBA’s stance as dovish as RBA Governor flagged that the need for outsized moves has diminished even as there are more rate increases ahead.
Singapore’s Monetary Authority of Singapore (MAS) tightened its monetary policy for the fifth time since October 2021, by re-centring upward the midpoint of the Singapore dollar nominal effective exchange rate (S$NEER) with no change to the slope or width of the band. The MAS revised its 2022 core and headline inflation forecasts to 4 percent and 6 percent, respectively. For 2023, it estimates core and headline inflation to remain elevated at 3.5-4.5 percent and 5.5-6.5 percent, respectively following the impact of the Goods and Services Tax (GST) increase in January 2023. The third quarter of 2022 advance Gross Domestic Product (GDP) estimates of 1.5 percent quarter-on-quarter (q/q) was ahead of the market expectation of 0.7 percent but MAS maintained its 2022 full-year GDP growth forecast at 3-4 percent and expects ‘below trend’ growth for 2023 on dimmer prospects for manufacturing and trade.
Hong Kong’s Policy Address 2022 outlined plans aimed largely at attracting top talents and easing the domestic housing woes. Key measures included a two-year visa program for high earners (minimum annual income of HK$2.5 million), suspension of its annual quota system for skilled talents, as well as a plan to refund extra property stamp duties for foreigners after a 7-year period.
China/Hong Kong equity markets succumbed to their worst monthly loss since 2011 amid foreign outflows following the conclusion of the 20th Chinese Communist Party (CPC) National Congress that signalled power concentration and more efficient execution. China’s third quarter of 2022 GDP grew stronger than expected at 3.9 percent year-on-year (y/y) (vs second quarter of 2022: 0.4 percent y/y) supported by resilient fixed asset investment. However, the Purchasing Managers’ Index in October 2022 fell to 49.2, showing a contraction in activity and below market expectations.
Outlook and Positioning
Amid an uncertain global macro environment, the REITs market saw volatility with interest rate expectations changing rapidly in 2022. We believe REITs still present an attractive investment proposition from a total return perspective, with a combination of stable dividend yield, supported by cash flow and upside potential for capital values. Our approach is to use both fundamental screening and valuation overlay to identify REITs with relatively more sustainable recovery paths, fewer concerns on financing risks, and better yield-plus-growth trajectories.
The performance of the Fund was elevated by the Australia market while the Hong Kong market was the main drag in October 2022.
The following chart shows the latest country allocation of the Fund as date of 31 October 2022.
Country Allocation, Source: UOBAM, 31 October 2022
The Fund aims to replicate as closely as possible, before expenses, the performance of the Index. The Index is reviewed semi-annually in March and September. Results from an Index review are implemented effectively on the fourth Monday of the review month. The latest Index review was on 26 September 2022, when the Fund’s rebalancing came into effect on the same day to track closely the Index. The Fund aims to have income distribution on a quarterly basis. Distributions in SGD are not guaranteed. Distributions may be made out of income, capital gains and/or capital. This relates to the disclosed distribution policy as set out in the Fund’s prospectus. Please refer to www.uobam.com.sg for more information. The ex-date of the latest dividend distribution was on 26 September 2022.
ESG (Environmental, Social, and Governance) Impact
Green Impact Dashboard
The Green Impact Dashboard (GID) measures the extent that green tilting[6] provides the Fund with a positive sustainability impact. It compares the performance of the Fund against the Non-Green Tilt APAC REIT index. The two indices have the same holdings, but the latter does not include a green tilt. We measure the Fund’s green impact from 4 metrics: greenhouse gas emission, energy consumption, water consumption and Green building certification.
This dashboard indicates that green tilting provides the Fund with a positive green impact and our investors can easily monitor the concrete impact.
Source: UOBAM, GRESB, October 2022
*DCR: Valid green building certification obtained at the time of design, construction, and/or renovation
**OPS: Valid operational green building certification
[1] IFC, “Green Buildings – A Finance and Policy Blueprint for Emerging Markets”, December 2019.
[2] JLL Research Commentary, “Premium rental for green buildings in Asia Pacific- Occupiers in Asia Pacific are willing to pay a premium rental for green-certified buildings”, 16 November 2021.
[3] Real Estate Investment Trust
[4] Exchange Traded Fund
[5] The expenses include costs, fees or other charges.
[6] Green tilting refers to the weights of selected REITs within the ETF/Index. The weights of selected REITs can either increase, reduce or remain unchanged at each index review date based on the GRESB Environmental Performance and Development Components (“Environmental Score”) in addition to the overall GRESB Score as assessed by the independent research firm, GRESB, to reward greener REITs and penalize less greener REITs.
All statistics quoted in the write-up are sourced from Bloomberg as of 31 October2022 unless otherwise stated.
Important Notice and Disclaimers
This document is for general information only. It does not constitute an offer or solicitation to deal in units (“Units”) in the UOB APAC Green REIT ETF (the ”Fund”) or investment advice or recommendation and was prepared without regard to the specific objectives, financial situation or needs of any particular person who may receive it.
The information contained in this document, including any data, projections and underlying assumptions, are based upon certain assumptions, management forecasts and analysis of information available and reflects prevailing conditions and the views of UOB Asset Management Ltd (“UOBAM”) as of the date of this document, all of which are subject to change at any time without notice. In preparing this document, UOBAM has relied upon and assumed, without independent verification, the accuracy and completeness of all information available from public sources or which was otherwise reviewed by UOBAM. While the information provided herein is believed to be reliable, UOBAM makes no representation or warranty whether express or implied, and accepts no responsibility or liability for its completeness or accuracy. Nothing in this document shall, under any circumstances constitute a continuing representation or give rise to any implication that there has not been or there will not be any change affecting the Fund. No representation or promise as to the performance of the Fund or the return on your investment is made. Past performance of the Fund or UOBAM and any past performance or prediction, projection or forecast of the economic trends or securities market are not necessarily indicative of the future or likely performance of the Fund or UOBAM. The value of Units and the income from them, if any, may fall as well as rise, and is likely to have high volatility due to the investment policies and/or portfolio management techniques employed by the Fund. Investments in Units involve risks, including the possible loss of the principal amount invested, and are not obligations of, deposits in, or guaranteed or insured by United Overseas Bank Limited (“UOB”), UOBAM, or any of their subsidiary, associate or affiliate (“UOB Group”) or distributors of the Fund. The Fund may use or invest in financial derivative instruments and you should be aware of the risks associated with investments in financial derivative instruments which are described in the Fund's prospectus. The UOB Group may have interests in the Units and may also perform or seek to perform brokering and other investment or securities-related services for the Fund.
Investors should note that the Fund is not like a conventional unit trust in that an investor cannot redeem his Units directly with UOBAM and can only do so through the participating dealers, either directly or through a stockbroker if his redemption amount satisfies a prescribed minimum that will be comparatively larger than that required for redemptions of units in a conventional unit trust. The list of participating dealers can be found at www.uobam.com.sg. An investor may therefore only be able to realise the value of his Units by selling the Units on the Singapore Exchange Limited (“SGX”). Investors should also note that any listing and quotation of Units on the SGX does not guarantee a liquid market for the Units.
An investment in unit trusts is subject to investment risks and foreign exchange risks, including the possible loss of the principal amount invested. Investors should read the Fund’s prospectus, which is available and may be obtained from UOBAM or any of its appointed agents or distributors, before deciding whether to subscribe for or purchase any Units. You may wish to seek advice from a financial adviser before making a commitment to invest in any Units, and in the event that you choose not to do so, you should consider carefully whether the Fund is suitable for you.
The Fund is not in any way sponsored, endorsed, sold or promoted by and/or its affiliates and SGX and/or its affiliates make no warranty or representation whatsoever, expressly or impliedly, either as to the results to be obtained from the use of the iEdge-UOB APAC Yield Focus Green REIT Index (the “Index”) and/or the figure at which the Index stands at any particular time on any particular day or otherwise, The Index is administered, calculated and published by SGX. SGX shall not be liable (whether in negligence or otherwise) to any person for any error in the Fund and the Index and shall not be under any obligation to advise any person of any error therein.
“SGX” is a trade mark of SGX and is used by the Index under license. All intellectual property rights in the Index vest in SGX.
The use of UOB's name, logo or trademark on this document in relation to the Fund is not representative of the views of UOB. UOB is not the offeror or manager of the Fund and does not perform any investment nor advisory role to UOBAM as a consequence of the use of the word “UOB” in the Fund’s name. UOB is not responsible for the performance of the Fund nor is UOB involved in the manner with which UOBAM manages the Fund. No recommendation or advice is given by UOB of any kind and this document was prepared without regard to the specific objectives, financial situation or needs of any particular person who may receive it. UOB assumes no direct or consequential liability for any errors in or reliance upon this document.
This advertisement or publication has not been reviewed by the Monetary Authority of Singapore.
UOB Asset Management Ltd Co. Reg. No. 198600120Z
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