In anticipation of the new REITs classification, State Street Global Advisor already came out with the Financial services Select Sector SPDR Fund (NYSEArca: XLFS) and XLRE back in October.
XLRE tries to reflect the performance of the Real Estate Select Sector Index, which include real estate management and development and REITs, excluding mortgage REITs.
XLFS tries to reflect the performance of the Financial Services Select Sector Index, which tracks areas like diversified financial services, insurance, banks, capital markets, consumer finance, thrifts, mortgage finance and mortgage REITs.
For long-term investors that use XLF as a proxy for financial sector exposure, this special dividend shouldn’t change their investment portfolio allocations much, except that they will now have to account for a new combination of XLF and XLRE holdings, which essentially make up the “old” XLF position.
However, XLF investors should keep in mind that this may trigger a taxable event and consult a tax advisor to better understand the potential implications of this special dividend event.
For more information on REITs, visit our REITs category.