REITs have been on fire this year as falling interest rates and high demand for income-generating assets have propped up the sector. While capital is largely being invested in domestic REITs, international opportunities are also starting to perk up.
The Guggenheim China Real Estate ETF (NYSE: TAO) is one way to access real estate investments in China, where property prices have skyrocketed over the last several years. This ETF contains 55 publicly traded REITs and land development companies located in both Hong Kong and mainland China.
Despite being the sole ETF dedicated to the China real estate market, TAO has a relatively small amount of total assets at $20 million. The fund charges a net expense ratio of 0.70 percent to shareholders and has historically only paid a single annual distribution at the end of the year.
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This year TAO has gained 2.89 percent after sustaining a sizeable drop in the first quarter. The fund has some momentum and is currently trading near the top end of its range.
Betting on single country sectors can be a hit or miss game that requires some skill to navigate. In 2012, TAO gained 58.73 percent, demonstrating that this ETF can offer periods of strong gains.
Another way to access China real estate is through a regional fund such as the iShares Asia Developed Real Estate ETF (NASDAQ: IFAS). This ETF targets real estate companies in Japan, Hong Kong, Australia, and Singapore.
In addition, the largest broad-based international fund in this space is the SPDR Dow Jones International Real Estate ETF (NYSE: RWX), which has 10 percent of its portfolio dedicated to Hong Kong. This ETF also invests in a variety of other developed and emerging market REITs as well.
So far this year, the diversified holdings in RWX and IFAS have served to boost the total return to 9.24 and 4.01 percent respectively.
With continued growth in China and an accommodative global interest rate environment, the stage may be set for another round of advancement in international real estate assets.
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