Market Overview

3 Real Estate ETFs Entering The All-Time High Club

3 Real Estate ETFs Entering The All-Time High Club

Low interest rates, investors' thirst for above-average yields and heavily domestic revenue streams are among the reasons real estate investment trusts and the related exchange traded funds are thriving this year.

As a sector, real estate is small in terms of weight in the S&P 500, but mighty in another: defensive traits and that's another reason why investors have flocking to the group this year. The MSCI US REIT Index, one of the most widely real estate benchmarks, is up more than 25% year to date, beating the S&P 500 by more than 800 basis points.

Though it was just one day, Monday was a microcosm of that theme. Just nine ETFs hit record highs, but seven of those funds were real estate products.

Let's look at a trio of REIT ETFs ascending into the prestigious all-time high club.

FlexShares Global Quality Real Estate Index Fund (GQRE)

The FlexShares Global Quality Real Estate Index Fund (NYSE: GQRE) has been a steady performer this year, beating the S&P 500 by almost 100 basis points while lobbing off a dividend yield of nearly 2.80%.

GQRE, which debuted in November 2013, tracks the Northern Trust Global Quality Real Estate Index. Most real estate indexes are cap-weighted, but GQRE is fundamentally-weighted and one of the traits the benchmark emphasizes is quality. That's a potentially rewarding trait due to the fact real estate companies typically carry large amounts of debt. GQRE's methodology can help investors steer clear of financially strained firms and stick with solid names with dividend growth potential.

Additionally, GQRE allocates about 40% of its weight to ex-U.S. REITs, meaning the fund is levered to declining interest rates in and outside of the U.S.

See Also: JPMorgan: REITs 'Set Up Well In This Environment'

Fundamental Income Net Lease Real Estate ETF (NETL)

The Fundamental Income Net Lease Real Estate ETF (NYSE: NETL) is one of the newer funds in the REIT fray, having debuted in late March. Rookie status aside, NETL has been an impressive performer in its just over six months on the market, gaining 12.19%.

NETL “encompasses a variety of REITs that provide sustainable cash flows by leasing their properties through long-term contractual leases on a triple-net lease basis,” according to the issuer. “The leases have terms that are generally 10 years or longer, predetermined rental rate increases and minimal landlord responsibilities.”

Net lease REITs are highly defensive by industry standards, but offer robust income potential. Bottom line: NETL provides investors with the positive traits REITs are known while addressing a corner of the sector often overlooked by traditional funds in this group.

U.S. Diversified Real Estate ETF (PPTY)

The U.S. Diversified Real Estate ETF (NYSE: PPTY) focuses on several prominent themes germane to real estate, including location and leverage.

“This distinct approach allows PPTY to build a portfolio of REITs that delivers the consistent property type and geographic diversification that real estate investors typically seek. Leverage and governance criteria are further included to reduce exposure to high-risk companies,” according to a statement from Atlanta-based Vident.

Further eschewing cap weighting, PPTY also emphasizes property and governance to go along with leverage and location to construct a smart beta portfolio of REITs. The methodology works as highlighted by a year-to gain of almost 27%.

Posted-In: REIT Sector ETFs Dividends Top Stories Trading Ideas ETFs Real Estate Best of Benzinga


Related Articles (NETL + GQRE)

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