Nikko STI ETF Portfolio Turnover Ratio Higher than SPDR STI ETF

I received SPDR STI ETF Annual Report in my mail. One thing that caught my attention was the portfolio turnover ratio.

The portfolio turnover ratio is indicative of the change in activity inside a unit trust, or most investments managed as a fund.

SPDR STI ETF have the following expense ratio and portfolio turnover profile:

Expense Ratio

2015: 0.30%
2014: 0.30%

Portfolio Turnover Ratio

2015: 0.94%
2014: 2.03%

I grabbed Nikko STI ETF’s 2013 and 2014 data:

Expense Ratio

2014: 0.38%
2013: 0.42%

Portfolio Turnover Ratio

2014: 8.95%
2013: 6.93%

Not always a fair comparison, but in the same year 2014, SPDR have a much lower portfolio turnover.

Expense Ratio is an important consideration because over the long run in passive index investing, cost matters. However, Portfolio turnover is a cost as well and one that should not be taken lightly.

Nikko AM have indicated that while the expense ratio of their STI ETF is higher their turnover is lower. This does not seem the case here.

POSB Invest Saver, which allows you to invest in the Singapore Straits Times Index with a minimum of $100 via GIRO (read here), is based on Nikko STI ETF.

To be fair, the turnover is much lower than most unit trusts, which can be more than 100% (which means rather active trading or switching of composition). Can the long term outlook be that big that warrants such big changes? Perhaps, but it gives the indication that these unit trust managers are quite the market timers.

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Kyith

Kyith is the Owner and Sole Writer behind Investment Moats. Readers tune in to Investment Moats to learn and build stronger, firmer wealth foundations, how to have a Passive investment strategy, know more about investing in REITs and the nuts and bolts of Active Investing.

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Kyith worked as an IT operations engineer from 2004 to 2019. Currently, he works as a Senior Solutions Specialist in Insurance Start-up Havend. All opinions on Investment Moats are his own and does not represent the views of Providend.

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