Latest / Investor Exchange / Amova-StraitsTrading Asia Ex Japan REIT ETF Reports Huge Performance Swing In 2025

Transcript

Amova-StraitsTrading Asia Ex Japan REIT ETF Reports Huge Performance Swing In 2025 · Investor Exchange

• 0:10
  Through those dense financial reports to find the knowledge that,
• 0:13
  well, actually matters.
• 0:15
  Today, we're really digging into Asian real estate investment trusts,
• 0:18
  specifically the financial year ending June 30, 2025 for a pretty major regional ETF.
• 0:26
  Yeah, and we should probably start with a bit of admin, actually.
• 0:28
  It sounds boring, but it's kind of crucial here.
• 0:30
  We're looking at the results for what's now called the Imova Straits Trading
• 0:33
  Asia X Japan REIT Index ETF.
• 0:36
  Right, that name change kicked in September 1st, 2025. So what we're really
• 0:40
  examining is the final year, just before that rebrand happened.
• 0:43
  It was the NICO-M straight-straining version before that. Good context to have
• 0:47
  as we look at the financials during that transition period. Exactly.
• 0:50
  So our mission today, unpack this annual report.
• 0:54
  We want to get our heads around that pretty stunning turnaround in performance,
• 0:58
  figure out why it happened, and see what the portfolio tells us about the fund's
• 1:02
  health and its strategy going for.
• 1:04
  Fundamentally, this ETF aims
• 1:06
  to track the FTSE, Epro, Neurite Asia X Japan REIT's 10% capped index.
• 1:12
  It uses a full replication strategy, basically buying everything in the index.
• 1:16
  Okay, and looking at the numbers, that strategy definitely captured the market's wild ride.
• 1:20
  The performance figures show this, well, dramatic swing from disaster to recovery, really.
• 1:26
  What's fascinating here is the total return for the year. It really tells a
• 1:30
  story, a story of an industry bouncing back hard. Let's get straight to those
• 1:33
  headline numbers then. Keep it simple for us. What was the bottom line for the year?
• 1:37
  Okay, so for the financial year ending June 30, 2025, the total return after
• 1:42
  tax was over $40.8 million.
• 1:46
  So a big positive number. 40.8 million. And how does that stack up against the
• 1:50
  year before? Because that contrast is key, isn't it?
• 1:52
  Oh, absolutely. It's night and day. The previous year, 2024.
• 1:56
  The fund reported a really substantial deficit.
• 1:59
  We're talking almost $35 million in the red.
• 2:02
  That was $34,818,334 to be exact.
• 2:07
  Wow. OK, so from down $35 million to up over $40 million, that's a swing of,
• 2:12
  what, roughly $75 million in just 12 months?
• 2:15
  Precisely. about a $75 million turnaround.
• 2:18
  So yeah, this wasn't just a minor tweak. It was a fundamental market shift impacting
• 2:22
  Asian re-valuations in a, well, in a huge way. $75 million.
• 2:26
  That's a lot of volatility. But look, for anyone investing long-term,
• 2:29
  you can't just look at one great year, especially if it's mostly recovery, right?
• 2:33
  How does this recent pop affect the longer-term picture? That's a really important
• 2:37
  point. And that's where we look at the NAB to NA returns.
• 2:39
  Net asset value to net asset value, it strips out the effect of new money coming
• 2:43
  in or out. So it's purely about how the underlying assets performed.
• 2:47
  Correct. Just asset growth and income. And yeah, the one-year return was strong,
• 2:50
  11.48%. But you zoom out, and those tougher preceding years really dragged the averages down.
• 2:57
  The three-year return is still negative, minus 3.24% annualized.
• 3:01
  And the five-year is also negative, minus 1.36% annualized.
• 3:05
  So 2025 is a much-needed balance, but the fund's still kind of digging out from
• 3:08
  that earlier hole. Got it.
• 3:10
  Now it's an index tracker. Its job is to match the index. How did it do on that front?
• 3:15
  Well, not perfectly. Across all the periods measured, the fund actually lagged
• 3:18
  the benchmark slightly.
• 3:19
  For instance, a strong one-year return, 11.48% for the fund.
• 3:23
  The benchmark did 12.51%. So almost a full percentage point behind.
• 3:28
  Why would that be? Especially with full replication, they're supposed to own everything.
• 3:31
  Is that gap, that nearly 1%? Is that just costs, like the expense ratio and
• 3:35
  maybe some trading drag? That's the most probable explanation, yeah.
• 3:39
  When you're mirroring an index like this, any consistent lag usually comes down
• 3:43
  to management fees, admin costs, maybe tiny bits of friction and executing trades.
• 3:48
  It suggests the fund's doing its job tracking the direction and volatility.
• 3:52
  But, you know, you as the investor are paying a small price for that service
• 3:56
  and it comes off the top of your return compared to the raw index.
• 3:59
  OK, let's unpack the cause of that S75 million dollar reversal.
• 4:03
  Before we get carried away by the 11 percent return, we need to know why.
• 4:06
  Was it steady income finally paying off or something else? It was definitely something else.
• 4:13
  Overwhelmingly, it was about the value of the investments changing,
• 4:16
  not just the regular cash flow.
• 4:17
  Can you break that down for us, the difference between those two things,
• 4:20
  especially for REITs? Sure.
• 4:22
  So REITs make money from rent, right? Property operations. That's your steady dividend income.
• 4:27
  Predictable, usually. But the value of the REIT itself, that's tied to the market
• 4:31
  price of the building's future prospects.
• 4:34
  That's where you get capital gains or losses. Now, if we look at the income
• 4:37
  first, dividends were super steady, S-19.58 million dollars in 2025.
• 4:43
  The year before, S-19.34 million dollars.
• 4:46
  Barely changed. Okay, so minimal change in the actual cash coming in.
• 4:50
  Got it. The explosion must have been in the asset values then. Exactly.
• 4:53
  In 2025, the fund booked net gains on investments of over S-24 million dollars.
• 4:59
  Now, cast your mind back to 2024, that year, they had those huge net losses
• 5:03
  of over S-51 million dollars.
• 5:06
  So what happened is, as maybe interest rate fears eased or the outlook for Asia
• 5:09
  improved, the market just repriced all those underlying properties higher.
• 5:13
  Boom, it reversed most of the paper losses from the year before.
• 5:16
  The market rebound was the engine
• 5:17
  here. Right. That kind of recovery often signals renewed confidence.
• 5:20
  Did investors feel it, too? Did people start putting money into the fund?
• 5:23
  Did it attract new cash? Oh, absolutely.
• 5:25
  The fund grew dramatically in size. Total net assets, the money belonging to
• 5:29
  unit holders, it ballooned.
• 5:31
  From S-324.2 million dollars in 2024 up to 462.6 million dollars in 2025.
• 5:40
  Wow, that's a big jump. How much of that roughly S-138 million dollar increase
• 5:44
  was the performance we talked about versus just new money flowing in?
• 5:47
  A very large chunk was new money.
• 5:49
  Get this. We saw S-166.5 million dollars in unit creations. That's new investment.
• 5:56
  And only the 46.6 million dollars went out in cancellations.
• 5:59
  So the net result, almost S-120 million dollar increase in the fund just from
• 6:03
  people buying in versus selling out. A hundred and twenty million dollar net inflow. Yeah.
• 6:07
  It tells you investors were jumping back in, using the ETF to get exposure right
• 6:11
  during that sharp recovery phase.
• 6:12
  Shows real market appetite returning. So market recover as investor confidence follows.
• 6:16
  What is that kind of rapid inflow, that 120 million, due to the manager's job?
• 6:20
  Is it hard to keep tracking the index accurately when cash is pouring in like that?
• 6:24
  Well, it certainly keeps them busy
• 6:25
  operationally. But the full replication strategy actually helps there.
• 6:29
  They know exactly what they need to buy and in what amounts to match the index
• 6:33
  as the new money arrives.
• 6:34
  The fact that the tracking error remained relatively small despite that surge
• 6:39
  suggests they handled the scaling pretty well, even with that slight drag from
• 6:43
  the expense ratio we mentioned.
• 6:44
  Okay, let's pivot to the portfolio itself then. Where is this almost half a
• 6:49
  billion dollars actually invested?
• 6:50
  The mandate is Asia x Japan, but is it spread out or is the risk concentrated somewhere?
• 6:57
  This is really key for anyone looking at this fund, because despite that broad
• 7:01
  Asia ex-Japan label, it's incredibly concentrated in one place, Singapore.
• 7:06
  It just dominates the allocation. How dominant are we talking?
• 7:10
  And did that change much year over year?
• 7:12
  Singapore makes up 67.91% of the total assets.
• 7:16
  Now, that's actually down slightly from just over 70% the year before, but still.
• 7:21
  Basically, two-thirds of the entire fund is tied to the fate of REITs in one
• 7:25
  single market. and the top holdings reflect that.
• 7:28
  Capital Land, Ascendas REITs. Capital Land Mall Trust REIT.
• 7:33
  Big Singaporean names. Link REIT from Hong Kong is up there too,
• 7:36
  but the Singapore focus is clear.
• 7:38
  Okay, two-thirds in Singapore, but they got that as $120 million in new cash.
• 7:42
  Did they use that opportunity to adjust the other parts of the portfolio?
• 7:46
  Did they shift things around outside of Singapore? They did,
• 7:48
  actually. And this is where you see some practical decisions being made within the index framework.
• 7:53
  Look at Malaysia, for instance. The allocation there more than doubled.
• 7:55
  It jumped from just under 2% to nearly 5.5%.
• 7:58
  Doubled the Malaysia slice. Okay, even if it's only 5.5% now,
• 8:01
  that's a deliberate move. Any idea what kind of Malaysian REITs they might be
• 8:04
  buying? Retail. Logistics.
• 8:06
  Something benefiting from recovery. The report doesn't break down the specific
• 8:10
  property types within each country, unfortunately.
• 8:12
  But yeah, deciding to significantly up the exposure there suggests they were
• 8:16
  maybe seeing better value or
• 8:18
  perhaps higher yields in Malaysia compared to other markets at that point.
• 8:22
  On the flip side, they trimmed their India exposure a bit. It went down from
• 8:26
  about 9.6 percent to just under 8 percent.
• 8:29
  So maybe took a little risk off in India to help fund that move into Malaysia. Interesting.
• 8:33
  So still managing actively within the index rules. Okay, let's talk financial
• 8:36
  health, risk management.
• 8:38
  Given it relies so much on those capital gains swinging around,
• 8:41
  how's its liquidity? Can it pay its bills?
• 8:44
  Liquidity looks very solid. All its financial liabilities, which were around
• 8:48
  $7.4 million total, are due in less than three months.
• 8:51
  And since the assets are all listed REITs, things they can sell easily on the
• 8:55
  market, there's basically no liquidity risk.
• 8:58
  They can meet those obligations without any trouble. Good.
• 9:01
  And what about market price risk? We saw that massive $75 million swing.
• 9:06
  What does the manager say about how sensitive the fund is to market moves?
• 9:09
  They're pretty upfront about it.
• 9:11
  The report states that a 12% move in the underlying index up or down would cause
• 9:16
  roughly a 12% change in the fund's net assets.
• 9:19
  It just highlights how closely tied it is. Investors need to expect these big swings.
• 9:24
  That 2024 loss and the 2025 gain, not freak events.
• 9:29
  That volatility is just part of the deal with this asset class.
• 9:32
  Right. Baked into the structure.
• 9:34
  Okay. One last small detail, that other income line. It's usually tiny,
• 9:37
  but where does that come from?
• 9:39
  Is the fund doing anything else besides holding REITs?
• 9:42
  Yeah, that's mostly from securities lending. It's like the fund is renting out
• 9:46
  some of its holdings for short periods.
• 9:47
  They earned about $67,849 doing that during the year. Not huge, but it's extra income.
• 9:54
  Renting out the assets? Is that risky? What if the borrower doesn't return them?
• 9:58
  Ah, good question. They protect themselves with collateral. The report is specific.
• 10:03
  The collateral is only non-cash assets, mainly high-quality government bonds.
• 10:06
  These bonds are held safely by the custodian, HSBC, and they have high credit ratings.
• 10:11
  So the fund isn't taking much risk there. It's just earning a small fee for
• 10:15
  lending assets it holds anyway.
• 10:16
  Okay, like a very safe little bonus income that S, $67,000 adds up.
• 10:22
  So let's wrap this up. What does this all mean for you, the listener?
• 10:25
  Let's boil down the main takeaways from this deep dive.
• 10:28
  The first big point, a massive turnaround in 2025, but driven almost entirely
• 10:34
  by the market recovery boosting asset values, not by higher income.
• 10:37
  It basically just reversed the big losses from 2024.
• 10:40
  Second, investors definitely noticed that recovery. They poured money in almost
• 10:44
  $120 million net inflow, showing strong confidence returning to the sector via this ETF.
• 10:50
  And third, while the manager made some tweaks, shifting a bit more towards Malaysia,
• 10:53
  for example, the portfolio is still heavily leaning on Singapore.
• 10:56
  We're talking nearly 68% concentration there. Okay, so putting it all together,
• 11:00
  we've seen huge volatility of that $75 million swing.
• 11:04
  We know that the fund moves pretty much one for one with the index,
• 11:07
  about 12% sensitivity. So here's a final thought for you to chew on.
• 11:11
  With nearly 68% of the fund tied to Singapore, how might that heavy concentration
• 11:15
  affect things going forward? Is it a stable anchor?
• 11:17
  Or could it be a vulnerability if, say, Singapore's market zags while the rest of Asia X Japan zags?
• 11:22
  Something to keep in mind as you watch this newly renamed Amova Straits trading ETF.