U.S. Real Estate based ETFs have shown positive performance YTD despite some recent bloodletting in notable funds like VNQ (Vanguard REIT, Expense Ratio 0.10%) and IYR (iShares REIT, Expense Ratio 0.48%) but a number of International/Globally based REIT ETFs have simply not participated in a broad equity rally and have registered negative returns year to date.
These include funds such as the China centric TAO (Guggenheim China Real Estate, Expense Ratio 0.65%), which remains rather small in terms of size ($35 mln in AUM), DRW (WisdomTree Global ex-U.S. Real Estate, Expense Ratio 0.58%), IFAS (iShares FTSE EPRA/NAREIT Asia, Expense Ratio 0.48%), and IFGL (iShares FTSE EPRA/NAREIT Global Real Estate ex-U.S., Expense Ratio 0.48%), all of which are in the red year to date in terms of performance. [Play the Real Estate Recovery with ETFs]
IFGL is the largest of these funds by a longshot, amassing about $693 million in assets under management since its 2007 inception and averaging now more than 800,000 shares traded on an average daily basis. This fund in particular has significant exposure to REITs based in Asia as well as in Europe, with the following portfolio breakdown (Japan 26.42%, Europe 23.87%, Asia (Developed) 23.43%, Australia 13.39%, Canada 5.02%, and Asia (Emerging) 2.73%).
REIT funds were extremely popular in 2012 and up until about May of 2013 as portfolio managers were interested in earning competitively high yields for portfolios and having some equity exposure via these REIT stocks, both U.S. and internationally based, but beginning in early May of this year there has certainly been some selling pressure in the space bringing prices in related ETFs down sharply across the board. [Bernanke Testimony Could be Pivotal for REIT ETFs]
The volatility in the space has been out of the ordinary recently as well, as one can pull up a basic chart in any of the aforementioned products and see that it has been one wild ride from May of this year until where we are now on the first of August.
It will be interesting to see how this broad REIT space performs in the last few months of 2013 given the recent technical breakout in the broad based equity indices, and the willingness of managers to adopt higher beta names and thus more risk via sectors such as Technology for instance (note recent QQQ breakout for instance) in their portfolios.
iShares FTSE EPRA/NAREIT Asia
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