REITs have historically tended to outperform in the 12 months following the end of a rate hiking cycle by the Fed, making now an interesting time to consider REIT ETFs.
REIT ETFs allow investors to gain exposure to the real estate market with a tax- and cost-efficient, highly liquid vehicle. Exposure to REITs can help provide diversification and improve risk versus return fundamentals.
Additionally, some REIT ETFs will be indirect beneficiaries of the AI trend. Data centers supply cloud computing infrastructure as well as the infrastructure needed to support AI and generative AI build-outs. Therefore, the REITs that own those data centers are a compelling investment opportunity, as they are currently seeing tremendous demand for properties and are set up well to play on the AI trend.
In the public REITs space, active ETFs may be better positioned to navigate current opportunities than passive funds. Some companies are overvalued which active managers would be able to avoid, despite meeting the criteria for inclusion in an index.
There are currently only four active REIT ETFs on the market in the U.S: the Avantis Real Estate ETF (AVRE), the ALPS Active REIT ETF (REIT), the Cambria Global Real Estate ETF (BLDG), and the Invesco Active U.S. Real Estate Fund (PSR).
Avantis Real Estate ETF (AVRE)
AVRE, launched in September 2021, is the youngest of the four funds. However, the Avantis ETF is also the largest with $533 million in assets under management.
While the Avantis ETF holds 290 names, nearly 74% of the fund by weight is in the top 50 names. Furthermore, around 38% of the fund by weight is in the top 10 holdings, according to ETF Database.
The fund charges 17 basis points.
See more: “Real Estate ETF AVRE Shines Amid Market Sell-Off”
ALPS Active REIT ETF (REIT)
ALPS’ active REIT ETF launched in February 2021 and has accreted $32 million in assets. The fund charges 68 basis points; however, it’s also the top performer over one year.
ALPS has a concentrated portfolio comprising 32 names. Over 50% of the fund by weight is in the top 10 names. However, with an actively managed REIT ETF, the fund managers can shift exposures to capture the current opportunity set and deliberately lean into exposure.
Cambria Global Real Estate ETF (BLDG)
BLDG, launched in September 2020, is the laggard of the four active REIT ETFs over one year. The fund is also the smaller by assets under management, with $26 million.
BLDG holds 77 securities and charges 60 basis points.
Invesco Active U.S. Real Estate Fund (PSR)
PSR is the oldest, having launched in November 2008. The fund has garnered $65 million in assets under management and charges 35 basis points.
PSR holds the fewest securities, including 26 names as of August 12, according to ETF Database.
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