This week U.S. listed real estate investment trusts have gotten a lift in assets thanks to hefty creation activity in related ETFs, iShares Dow Jones U.S. REIT (NYSEArca: IYR) and Vanguard REIT (NYSEArca: VNQ), which have collectively accumulated more than $700 million this week alone.
Many have looked to the REIT space not only as a place for potential principal protection as far as limited downside, but also as a source of dividend yield.
Thus, REITs have been a popular spot for asset managers over the past year due to this “defensive” nature of the stocks in the underlying indexes. Year to date, REITs have trailed the broad market, and in a “risk on” rally which has prevailed throughout much of 2012, one would expect a lag in performance.
IYR is up 13.63% versus VNQ’s return of 12.18% compared to the S&P 500 Index’s return of 15.31% during the same time period. When deconstructing the underlying portfolios of both IYR and VNQ, one can see that IYR has 25% of its overall weighting spread across the top 5 stocks in the underlying index (SPG, AMT, PSA, HCP, VTR).
There is quite a bit of overlap in VNQ when compared to IYR, as SPG is again the top weighted stock, making up 10.99% of the overall index. Holdings from #2 to #5 are PSA (4.98%), EQR (4.44%), VTR (4.32%), and HCP (4.29%).
Notably, VNQ only charges the investor 10 basis points in terms of an expense ratio whereas IYR’s fee is 48 basis points. We expect that given the recent climb in home prices as well as in commercial office properties, that REIT based funds will experience renewed interest.
iShares Dow Jones U.S. REIT
For more information on Street One ETF research and ETF trade execution/liquidity services, contact Paul Weisbruch at pweisbruch@streetonefinancial.com.