“This is likely to pressure some funds to add exposure to Reits,” Todd Rosenbluth, director of ETF & mutual fund research at S&P Global, told the Financial Times.
SEE MORE: 44 Best REITs ETFs to Generate Yields
REITs are securities that trade like a stock and invest in real estate directly through property ownership or mortgages. Consequently, revenue are mainly generated through rents or interest on mortgage loans. To qualify for special tax considerations, the asset also distributes the majority of income, about 90% of taxable profits, to investors as dividends.
Investors interested in gaining exposure to the broad REITs sector have a number of broad options available. For instance, the Vanguard REIT ETF (NYSEArca: VNQ), SPDR Dow Jones REIT ETF (NYSEArca: RWR) and iShares Dow Jones US Real Estate Index Fund (NYSEArca: IYR) are among the most popular REIT ETF plays.
In anticipation of the new REITs classification, State Street Global Advisor also came out with the Financial services Select Sector SPDR Fund (NYSEArca: XLFS) and the Real Estate Select Sector SPDR Fund (NYSEArca: XLRE) back in October – the fund operator, though, will still operate the broader Financial Services Select Sector SPDR (NYSEArca: XLF).
For more information on real estate investment trusts, visit our REITs category.