Daily ETF Watch: Real Estate Fund Planned

August 31, 2015

The most recent filing from First Trust outlines the firm’s plans to roll out an actively managed global real estate fund. The First Trust Heitman Global Prime Real Estate ETF will be subadvised by Heitman, a real estate investment management firm.

The ETF can invest in the full spectrum of real estate equities, including REITs, operating companies and other companies involved in the real estate industry. Although the actively managed fund will aim for a buy-and-hold strategy, it will be very active in how it selects its holdings, using rigorous analysis. The fund will select its holdings via a hands-on approach that relies on the findings of the firm’s portfolio analysts through interaction with the companies in question and other research sources.

From there, the fund will focus on companies that have “more than 75 percent of their gross asset value in prime markets” and “more than 50 percent of their assets under management in prime assets,” according to the prospectus. Prime, in the real estate world, typically refers to top-of-the-line property in terms of quality and price.

Regional teams will select the holdings for what will be a “high conviction” portfolio based on the company’s balance sheet, the quality of its management team and its expected growth.

There are several global real estate ETFs on the market, but none is actively managed. First Trust will be staking its claim in unexplored territory.

The largest of the index-based global real estate funds is the SPDR Dow Jones Global Real Estate ETF (RWO | B-72), which launched in 2008 and has nearly $2 billion in assets. It tracks a plain-vanilla cap-weighted index.

The First Trust ETF will come with an expense ratio of 0.95 percent, nearly double the price of RWO. The filing did not include a ticker.


Contact Heather Bell at [email protected].

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