On January 29th we highlighted inflows in the second largest REIT focused ETF in the marketplace, IYR (iShares U.S. Real Estate, Expense Ratio 0.48%) and the fund has rallied more than 6% since then to current levels.
Yesterday we saw an uptick in options activity in the name, primarily constituted of April 67 put buying, which are currently out of the money options with several weeks left until expiration. Top holdings are the following: SPG (7.63%), AMT (5.04%), PSA (3.82%), PLD (3.22%), and EQR (3.06%).
There is some diversification within the index itself in terms of which types of REITs the fund invests in, for instance about 30% of the portfolio is dedicated to Specialty REITs, and approximately 19% apiece allocated to Retail and Industrial REITs.
This does not appear to be an earnings related options play, as the top holdings in the index that we mentioned largely report corporate results after April expiration throughout the month of May. Given the
nice short term run in the sector however, perhaps the put buyers are attempting to lock in recent gains to some extent. IYR now holds about $4.6 billion in assets under management and trades an impressive 9.7 million shares on an average daily basis.
The largest fund in the space VNQ (Vanguard REIT, Expense Ratio 0.10%) interestingly trades only about 3.7 million shares on an average daily basis but has more than $21 billion in assets under management. Strong asset flows have not been relegated to IYR only, with the fund pulling in >$700 million in new assets year to date, as VNQ has reeled in a notable $1.97 billion year to date in fresh new assets as well.
Other funds of considerable size in the REIT space that should be watched closely as well in the near term given the interest in the sector via ETFs as well as options include ICF (iShares Cohen & Steers Realty Majors Index, Expense Ratio 0.35%), RWR (SPDR DJ REIT, Expense Ratio 0.25%), and REM (iShares FTSE NAREIT Mortgage REIT, Expense Ratio 0.48%) to name the largest funds in the space outside of IYR and VNQ.
ICF has about $2.6 billion in AUM, followed by RWR’s $2.3 billion and REM’s $1.2 billion. Several smaller, and perhaps not terribly well-known trading oriented (some incorporate daily leverage) funds exist for those looking to employ bearish strategies in REITs given the recent overhang of put buying, and these include DRV (Direxion Daily Real Estate Bear 3X Shares, Expense Ratio 0.95%), REK (ProShares Short Real Estate, Expense Ratio 0.95%), and SRS (ProShares UltraShort Real Estate, Expense Ratio 0.95%).
iShares U.S. Real Estate ETF
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