Real Estate: Why Investors are Buying REIT ETFs

ETF Trends

The REIT space thus far in 2013 has impressed in terms of garnering new assets, with the two largest products in the category, VNQ (Vanguard REIT, Expense Ratio 0.10%) attracting greater than $2 billion YTD, and IYR (iShares DJ U.S. Real Estate, Expense Ratio 0.48%) taking in north of $500 million.

These ETFs have more of a mid-cap/large cap slant in terms of portfolio composition, and today we would like to focus on a particular small cap oriented fund in the REIT space that saw an uptick in trading action last week.

ROOF (IndexIQ Real Estate Small Cap, Expense Ratio 0.69%), after climbing steadily throughout 2013, has recently seen its trading volume tick up (average daily volume is about 30,000 shares) and the fund has attracted more than $30 million year to date in terms of net inflows (total asset base is $50 million now).

The fund debuted in June of 2011, so we are still shy of the ETF’s two year anniversary of live performance, but the recent traction in terms of fund is growth is certainly encouraging.

The entire portfolio is dedicated to investing in small and microcap names in the U.S. Real Estate space, with top holdings in lesser known REIT names such as IVR (Invesco Mortgage Capital) 5.02%, ARMOUR Residential REIT (4.33%) and Newcastle Investment Corporation (NCT, 4.30%). Currently forty nine individual companies in the space are owned within ROOF, and the fund has a yield of 4.48% which likely has its appeal to yield oriented investors (compared to IYR’s 3.52% yield and VNQ’s 3.37% yield).

IndexIQ Real Estate Small Cap

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For more information on Street One ETF research and ETF trade execution/liquidity services, contact Paul Weisbruch at pweisbruch@streetonefinancial.com.

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