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ETF Spotlight: Mortgage-Backed Real Estate Investment Trust

tlydon@globaltrend.com (Tom Lydon)

ETF spotlight on the Market Vectors Mortgage REIT Income ETF (MORT) , part of an ongoing series.

Assets : $51.6 million

Objective : The Market Vectors Mortgage REIT Income ETF tries to reflect the performance of the Market Vectors Global REITs Index, which follows publicly traded mortgage real estate investment trusts.

Holdings : Top holdings include: Annaly Capital Management (NLY) 20.6%, American Capital Agency Corp (AGNC) 15.9%, MFA Financial (MFA) 5.1%, Hatteras Financial (HTS) 4.9% and Invesco Mortgage Capital (IVR) 4.8%.

What You Should Know :

  • Van Eck Global’s Market Vectors sponsors the fund.
  • MORT has an expense ratio of 0.40%.
  • The fund has 25 holdings and the top 10 make up 73.4% of the overall portfolio.
  • Market capitalization allocations include: large-cap 35.1%, mid-cap 39.9% and small-cap 25.0%.
  • The ETF has 12.09% 30-day SEC yield.
  • The fund is up 5.5% over the last month, up 8.4% over the past three months and up 22.3% year-to-date.
  • MORT is 6.7% above its 200-day exponential moving average.
  • Real estate investment trusts are exempt from corporate taxes if they distribute at least 90% of income to share holders.
  • Distributions are not qualified ad are taxed as ordinary income.
  • “This ETF’s portfolio is composed of mortgage REITs, which are firms that seek to benefit from the spread between short-term and long-term rates by using very short-term debt such as repurchase agreements to fund purchases of residential and commercial mortgage-backed securities,” according to Morningstar analyst Patricia Oey.
  • “At this time, mortgage REITs are benefiting from historically low short-term rates,” Oey added. “Given that the underlying investments in this ETF are mortgage-backed securities, investors in this ETF are exposed to credit risk and prepayment risk.”

The Latest News :

  • Mortgage-backed REITs are benefiting from the low, stable interest rate environment, at least through 2014.
  • The spread between the 2-year Treasury and 10-year Treasury bonds of around 125 basis points and 200 basis points help make REITs an attractive option.
  • The 30-year fixed-rate average hit a historic low 3.49%, compared to the average 4.55% last year.
  • “Market concerns over the strength of the economic recovery brought long-term Treasury yields to new lows this week allowing fixed mortgage rates to reach record levels,” Frank Nothaft, Freddie Mac vice president and chief economist, said in a Washington Post article.

Market Vectors Mortgage REIT Income ETF

For past stories in this series, visit our ETF Spotlight category.

Max Chen contributed to this article.