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A Structural Analysis of Smart Beta Fund ICF

Ivan Kading

Smart Beta Fund ICF: A Structural Analysis

Quality REIT portfolio

The iShares Cohen & Steers REIT ETF (ICF) seeks to replicate the price movement of the Cohen & Steers Realty Majors Index. The index provider primarily includes relatively large and liquid REITs that may benefit from the future consolidation and securitization of the US real estate industry.

REITs for inclusion in ICF’s portfolio are selected using a multifactor model based on management, portfolio quality, and sector and geographic diversification. ICF can be classified as a pure sectoral thematic fund.

The above chart gives a comparison of ICF with other sectoral smart beta funds such as the PowerShares Dynamic Pharmaceuticals ETF (PJP) and the PowerShares Dynamic Biotech & Genome ETF (PBE).

ICF’s performance relative to other ETFs

ICF’s price movement in the market has clearly underperformed in comparison to the ETFs mentioned above. After leading PJP and PBE in early January 2015, ICF starting lagging behind them. PJP’s index provider mainly includes pharmaceutical and other healthcare product stocks in its portfolio. PBE, on the contrary, manages a portfolio composed of biotechnology companies.

Thematic style

The top holdings of ICF are Public Storage (PSA), Equity Residential (EQR), Boston Properties (BXP), Equinix (EQIX), and Vornado Realty Trust (VNO).

A real estate investment trust (or REIT) is a company that owns and, in most cases, operates income-producing real estate. The thematic nature of ICF makes it one of the riskiest asset types in the market.

In the next part of this series, we’ll analyze moving average trends and analysts’ estimates for ICF’s top holdings.

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