Nuveen has been slowly growing its NuShare line of exchange traded funds, adding a real estate investment trust option that targets short-term leases.
On Tuesday, Nuveen rolled out the NuShares Short-Term REIT ETF (BATS: NURE). NURE has a 0.35% expense ratio.
The NuShares Short-Term REIT ETF tries to reflect the peformance of the Dow Jones U.S. Select Short-Term REIT Index, which is comprised of real estate investment trusts that invest in residential or commercial real estate with a shorter-than-average lease duration than REITs investing in other sectors.
NURE provides “access to REITs with short-term lease agreements which may be less volatile and sensitive to interest-rate changes than longer-term REIT,” according to Nuveen.
Specifically, the underlying index concentrates holdings in apartment buildings, hotels, self-storage facilities or manufactured home properties. The benchmark will also exclude mortgage REITs, hybrid REITs, certain other types of REITs, real estate finance companies, mortgage brokers and bankers, commercial home builders, large landowners and subdividers of unimproved land, and companies that have more than 25% of their assets in direct mortgage investments.
Current holdings include apartment REITs 49.9%, hotel REITs 25.3%, self storage REITs 16.3% and manufactured home REITs 8.5%.
Components are also weighted by float-adjusted market capitalization where no single REIT can make up more than 5% of the index as of any rebalance in March, June, September and December.
Top holdings include Mid-America Apartment communities 7.5%, Host Hotels & Resorts 5.5%, Essex Property Trust 5.0%, Public Storage 4.9% and Equity Residential 4.9%.
“As short-term REITS have historically outperformed the broad U.S. listed REIT universe in times of rising interest rates, we are pleased to offer investors exposure that is unique to the ETF marketplace,” Martin Kremenstein, Managing Director and Head of Exchange-Traded Funds at Nuveen, said in a note.
These types of shorter-term REITs may be a good way for income-minded investors access yield generation in a rising rate environment as short-term contracts allow businesses to more quickly reprice and adapt to changing market environments. Due to the REITs structure that allows the majority of revenue to be distributed as income to shareholders, businesses’ prudent reactions could translate to higher returns for investors.
For more information on new fund products, visit our new ETFs category.