The Federal Reserve keeps insisting it is not in a hurry to boost interest rates. The exact timetable for higher rates in the U.S. remains to be seen, but 10-year Treasury yields have tumbled 14.4% this year.
Predictably, that has been goods for scores of exchange traded funds tracking rate-sensitive asset classes, such as real estate investment trusts (REITs). Year-to-date, the Vanguard REIT ETF (NYSEArca: VNQ), the largest REIT ETF, is up 13.6% and just two ETFs have added more new assets than VNQ. [Sector ETFs Grow as Investors Get Tactical]
Investors considering REIT ETFs should not overlook the Guggenheim Wilshire US REIT ETF (NYSEArca: WREI). Proving that good things often come in small packages in the world of ETFs, WREI has just under $19 million in assets under management, but the fund has surged 19.6% year-to-date.
The cap-weighted WREI, which debuted in March 2010, tracks the Wilshire US Real Estate Investment Trust Index, a derivative of the Wilshire 5000 Total Market Index.
With yield hunters delving into alternative segments of the market in search of income, WREI is a credible idea with a trailing 12-month yield of 2.87%, more than 30 basis points above 10-year Treasuries, according to Guggenheim data. Companies have to pay out 90% of its taxable income to shareholders as dividends to qualify as a REIT.
Solid fundamentals have boosted REIT ETFs, including WREI, this year. Demand for commercial space has soared with the average occupancy rate across all REIT portfolios is now at 93.6%, near its last occupancy-rate peak of 94.3% in 2007. [Solid Fundamentals for REIT ETFs]