REIT ETFs in pillar 3a

In this post, the conclusion that Swiss investors should probably stay away from REIT ETFs was reached.
The biggest con was the fact that the return from such ETFs is mostly in dividends payouts, which are taxed at marginal tax rate (could be around 30/40%).
On top of income tax, we have withholding tax (say, around 15%) and fund TER.
All of this is in taxable accounts.

But REIT ETFs have historically provided a diversification benefit, due to their uncorrelation with the stock market, with a risk and return profile that is similar to stocks. It would be a good idea to own some REIT ETFs if one could solve the taxation issues.

(source: All About Asset Allocation, R. Ferri).

Now, I see that Finpension offers e.g. CSIF (CH) III Real Estate World ex CH -
Pension Fund ZB
(just an example, one could also add a Swiss REIT ETF on top of that) for their pillar 3a.
In summary, we have:

  • 0% income tax
  • the usual withholding tax (say, 15%, but could be lower or higher)
  • 0% TER
  • Finpension fees that at the time of writing amount to 0,39 %
  • tax at withdrawal, say, around 9%

Would you buy this ETF, or a similar product? Why not?

You probably need to differentiate between ETFs and regular RE funds.

(Direct RE funds actually have a fairly nice tax treatment, they are tax free for the investor)

(Though might be mostly true for CH funds, but then RE investment mostly makes sense in the place you live, since it’s partly a hedge against housing cost increases)

Thanks for you answer!

So, the quoted product is not an ETF, right.
It is an RE fund that tracks the FTSE EPRA Nareit Developed Index, ex CH (“incorporates Real Estate Investment Trusts (REITs) and Real Estate Holding & Development companies”).
I think it qualifies as a good substitution for a global REIT ETF, so, given the implied diversification benefits, it could be a good idea to include it in a portfolio.
Somewhat in disagreement to your post :upside_down_face:

What do you think?

The question will be why do you want to increase the REIT allocation from your traditional portfolio ?
The top 10 holdings of CSIF (CH) III Real Estate World ex CH -
Pension Fund ZB
are already present in VT (even if their weight average between 0,10 to 0,06%)…

You can search them in the HOLDINGS section and there is 9,823 of them as of 01/31/2024.

Also traditional companies already own real estate within their investments allocations (e.g. Amazon owns storage, LVMH owns shops …).

To reduce risk and increase return.
The image that I posted seem to suggest that REITs can help getting there.

Two funds in a Viac Strategy:
SMI vs Swiss REIT. It doesn’t seem to reduce risk. They seem to move together.
Maybe I should have taken another fund to compare with, but I am starting to think that I should remove REIT from my standard Global 80 strategy and replace it with bonds.

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