Newcomer Debuts Active REIT ETF

Armada ETF Advisors has debuted its first fund, the only actively managed take on residential real estate currently on the market. 

The Home Appreciation U.S. REIT ETF (HAUS) debuted on the Cboe Global Markets Tuesday with an expense ratio of 0.60%. 

HAUS actively manages a portfolio of U.S. and Toronto Stock Exchange-listed REITs that generate most of their revenue from managing apartments, single-family rentals or senior housing in the U.S. 

The new fund enters a market niche with little competition. The only other ETF focusing specifically on residential housing REITs is the index-based Kelly Residential & Apartment Real Estate ETF (RESI), which launched in January and has $1.3 million in assets so far. 

Armada is led by David Auerbach, a former institutional trader specializing in REITs at World Equity Group, Esposito Securities and Green Street Advisors. 

In an interview, Auerbach said the COVID-19 pandemic caused multiple shifts in the rental markets, such as an exodus of seniors from communal living to reduce their chances of infection and an acceleration of migration from the coasts to Texas, the south and the Sun Belt. That puts broad real estate funds like the Vanguard Real Estate ETF (VNQ) at risk of holding REITs that are poised for a downturn due to changing demand patterns, he argues. 

The housing market has been particularly hot in recent years due to overwhelming demand for space during the stay-at-home period and the broader acceptance of work-from-home as the pandemic wanes. That market may slow down slightly once the Federal Reserve starts hiking rates and by extension makes borrowing more expensive. 

Auerbach said the ongoing appreciation in home purchase price against the ongoing increase in large-city rents will force more interest in single-family rental REITs. 

“That's why I feel like there is going to be this inherent underlying demand for apartments and single-family rentals,” he said. “So many people are being left out in the cold [on] owning their own properties.” 

Contact Dan Mika at [email protected], and follow him on Twitter ​