Daily ETF Watch: Real Estate New Global Sector

Real estate earns its rightful place as its own separate sector in the investment universe.

Olly
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Managing Editor
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Reviewed by: Olly Ludwig
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Edited by: Olly Ludwig

Real estate was added to the Global Industry Classification Standard (GICS) structure earlier this year and a proposed ETF from Fidelity Investments will make the addition to the GICS structure a reality for investors to take advantage of.

Real estate had previously been folded into the financials sector, S&P Dow Jones Indices and MSCI said in a joint press release earlier this month. The expansion of the GICS rubric has opened the door to at least one new ETF targeting real estate investment trusts (REITs).

“Investors told us that there are significant differences between public Real Estate and Financial companies and therefore Real Estate deserves a dedicated GICS Sector,” Remy Briand, MSCI’s Global Head of Equity Research, said in the press release.

Wasting no time, Fidelity filed a registration statement dated Nov. 7 detailing the planned Fidelity MSCI Real Estate Index ETF. The new fund will be an addition to Fidelity’s existing family of 10 sector ETFs that it brought to market a bit more than a year ago.

A Leg Up On The Competition?

The paperwork didn’t include a ticker or an annual expense ratio, but it’s almost guaranteed that the new fund will match the 12-basis-point—$12 for each $10,000 invested—prices of its existing lineup. Fidelity has bragging rights for the cheapest expense ratios of any lineup of sector funds.

The Fidelity sector funds compete with sector-fund lineups from the top three ETF providers: BlackRock’s iShares, State Street Global Global Advisors and Vanguard. SSgA, in particular, has established a brand resonance in the ETF industry with its lineup of SPDR “Select Sector” funds.

Those SPDR sector funds are also extolled for their high liquidity, which helps control trading costs—one aspect of ETF ownership that perhaps isn’t yet sufficiently appreciated among investors.

Each of those “big three” ETF providers already markets its own respective REIT-focused ETF, and it’s not yet clear whether any of them will market any additional ETFs to reflect the precise changes to the GICS universe.

The new Fidelity fund will have its primary listing on NYSE Arca, the fund’s preliminary prospectus said.

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Olly Ludwig is the former managing editor of etf.com. Previously, he was a financial advisor at Morgan Stanley Smith Barney and an editor at Bloomberg News. Before that, Ludwig was a journalist at the Reuters News Agency in New York.