ETF Chart of the Day: Rocking REITs
July 17th at 12:00pm by Tom Lydon
We are watching REITs closely not only because it is earnings season but there has been considerable interest this week in two of the benchmark ETF names in the space.
IYR (iShares U.S. Estate, Expense Ratio 0.46%) has been active on the options front, with August 73 calls seeing good interest, with the fund itself seeing greater than $150 million flow out in recent sessions. IYR is the second largest ETF in the REIT space, but well behind VNQ (Vanguard REIT, Expense Ratio 0.10%) which has $24.2 billion in assets under management.
Speaking of Vanguard, lesser known VNQI (Vanguard Global ex-U.S. Real Estate, Expense Ratio 0.27%) has seen some action as well in pulling in new assets, and this fund has now grown to about $1.9 billion in AUM. RWX (SPDR DJ International Real Estate, Expense Ratio 0.59%) with $4.8 billion in the largest player in that specific space.
With most of the REIT space trading at or near recent and multi-year highs, any significant trading activity at these levels could be pivotal and is worth watching closely. The REIT space has traditionally attracted yield players at least on the portfolio management side, and thus there are many successful funds in the category that have grown north of $1 billion in AUM.
These include ICF (iShares Cohen & Steers Realty Majors, Expense Ratio 0.35%), RWR (SPDR DJ REIT, Expense Ratio 0.25%), REM (iShares FTSE NAREIT Mortgage REIT, Expense Ratio 0.48%), and SCHH (Schwab U.S. REIT, Expense Ratio 0.07%).
Of course, as price goes higher, yields go lower, with IYR and VNQ currently yielding 3.57% and 3.05% respectively, so it will be interesting to see at which level yield chasers might believe that the risk has outstretched potential reward.
Back to the original names of focus here, IYR and VNQ, several of the top components in each are slated to report quarterly earnings in the near term, for example in terms of VNQ, SPG (8.70%, 7/23), PSA (4.20%, 7/31), EQR (3.53%, 7/29) and for IYR, SPG (7.32%, also the #1 holding), AMT (5.04%, 7/30), and PSA (3.52%). DRN (Direxion Daily Real Estate Bull 3X, Expense Ratio 0.95%) and DRV (Direxion Daily Real Estate Bear 3X, Expense Ratio 0.95%) should both be expected to see more usage in the short term as well as potential hedges if not outright short term directional trades.
iShares U.S. Real Estate ETF
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