A Big REIT ETF Is Changing Indexes

Start generating passive income through real estate.

Own a piece of your favorite cities through diversified real estate investments in the country's top markets

*Terms and conditions apply. Visit Nada's website for more details.

Earlier this year, Vanguard proposed to investors an index change for the popular Vanguard REIT ETF VNQ and related index funds. VNQ is the largest exchange traded fund providing exposure to real estate investment trusts.

Pennsylvania-based Vanguard, the second-largest U.S. ETF issuer, said shareholders have approved the index swap. VNQ, the Vanguard REIT Index Fund and Vanguard Variable Insurance Fund-REIT Index Portfolio will switch to the MSCI US Investable Market Real Estate 25/50 Index.

That index “includes real estate management and development companies in addition to real estate investment trusts (REITs), offering broader exposure to the real estate market. Shareholders also approved a proposal to reclassify the Vanguard REIT Index Fund from 'diversified' to 'nondiversified' as defined by securities laws,” according to a statement from Vanguard.

A Big ETF

Not only is VNQ the largest REIT ETF, it's the largest sector ETF of any variety. The ETF has $35.3 billion in assets under management, a sum surpassed by just 18 other ETFs. VNQ currently tracks the MSCI US REIT Index.

“Starting with Vanguard’s REIT index change, the new benchmark will include many specialty REIT companies that are now in several other REIT index and active funds,” said CFRA Research Director of ETF & Mutual Fund Research Todd Rosenbluth in a note out Thursday.

VNQ is up 3 percent a year-to-date, a performance that has been hindered by the ETF not holding some of the better-performing REITs, such as American Tower Corp. AMT, Crown Castle International Corp. CCI, SBA Communications Corp. SBAC and Weyerhaeuser Co. WY, according to Rosenbluth.

Current Look

In its current form, VNQ holds 154 stocks, 18.3 percent of which are classified as specialized REITs. The ETF allocates just over 18 percent to retail REITs and 16.5 percent to residential REITs. VNQ has a dividend yield of 4.8 percent.

VNQ's annual fee is 0.12 percent, or $12 on a $10,000 investment, making it cheaper than 90 percent of rival funds.

Related Links:

Issues With Junk Bond ETFs

Tech ETFs Keep Soaring

Disclosure: The author owns shares of VNQ.

Market News and Data brought to you by Benzinga APIs
Comments
Loading...
Posted In: Long IdeasREITSector ETFsTop StoriesTrading IdeasETFsReal Estatevanguard
Benzinga simplifies the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!