FlexShares Offers Global REIT ETF

November 07, 2013

Fund will be self-indexed using fundamental methodology.

FlexShares, the ETF arm of Chicago-based bank Northern Trust, launched a globally focused REIT ETF that will trade under the symbol “GQRE” on the NYSE Arca. The fund is a fundamental self-indexed offering that is looking to capitalize on popular trends currently playing out within the ETF space.

The FlexShares Global Quality Real Estate Index Fund is benchmarked to the Northern Trust Global Quality Real Estate Index, which is betting on U.S. and non-U.S. real estate investment trusts and real estate companies with proven profitability, management expertise and cash flow, among other factors.

Crucial to investors is the fact that dividend ETFs remain popular in the current uncertain market. As long as REITs are required by the IRS to pay out at least 90 percent of their annual incomes to shareholders, FlexShares is relying on its latest offering to find a place in yield-hungry investors’ portfolios.

“Research shows that a high-quality, value-focused portfolio of real estate securities may offer attractive returns with less volatility compared to traditional capitalization-weighted global real estate indices,” said Shundrawn Thomas, head of Northern Trust's FlexShares Exchange Traded Funds Group, in a press release.

The fundamental fund’s launch comes at a time when the S&P 500 is hitting new highs and large-cap stocks look stable in an environment of economic uncertainty. WisdomTree is one of the pioneers of both fundamental and self-indexing. The majority of its lineup comprises fundamentally weighted ETFs that target securities based on their earnings and dividend streams.

The FlexShares’ fund’s self-indexing methodology also follows suit with other firms, such as Emerging Global Advisors and Salient Advisors, which are looking to bring their wares to market more efficiently and cheaper relative to their peers who utilize third-party indexers.

GQRE will bump heads with the $1.1 billion SPDR Dow Jones Global Real Estate ETF (RWO | C-65); and the $111.6 million Cohen & Steers Global Realty Majors fund (GRI | C-67), which have expense ratios of 50 and 55 basis points, respectively.

The fund is looking to undercut its more established peers by charging 0.45 percent, or $45 for every $10,000 invested.

 

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