REIT ETFs Take Different Paths In '08

September 15, 2008

 

Even with the recent slide, all of the six broad-based domestic REIT index ETFs are up year-to-date.

 

 

YTD (%)

12 Mos. (%)

2007 (%)

3 Mos. (%)

Vanguard REIT Index

3.74

-3.63

-16.5

0.39

SPDR DJ Wilshire REIT

4.20

-4.18

-17.76

1.19

iShares C&S Realty

4.54

-3.69

-18.20

1.17

First Trust S&P REIT

1.13

-6.13

N/A

-1.12

iShares FTSE EPRA/NAREIT North America

4.33

N/A

N/A

3.51

iShares DJ Real Estate

1.20

-6.22

-18.09

0.28

 

 

All the broad-based domestic REIT funds have holdings ranging from 80-120 REIT stocks, with the exception of the iShares Cohen & Steers Realty Majors Index ETF (NYSEArca: ICF), which holds 31 REIT stocks. While it is much more concentrated, its top 10 holdings are spread across all the major REIT sectors, and its performance year-to-date is No. 1 versus its ETF peers.

However, as one might expect, the major distinction between the Vanguard REIT ETF and iShares C&S REIT ETF, other than in holdings, is the expense ratio: 12 basis points versus 35 basis points. In fact, the Vanguard REIT ETF has a much lower expense ratio than all the broad-based REIT ETFs.

 

 

 

Exp. Ratio

Net Assets (In Bill.)

Holdings

Ticker

Vanguard REIT Index

0.12

2,537.00

98

VNQ

SPDR DJ Wilshire REIT

0.25

1,449.8

86

RWR

iShares C&S Realty

0.35

2,555.5

31

ICF

First Trust S&P REIT

0.50

2.4

101

FRI

iShares FTSE EPRA/NAREIT North America

0.48

4.6

119

IFNA

iShares DJ Real Estate

0.48

1,859.00

80

IYR

 

 

The Vanguard and iShares Cohen & Steers fund share nine of 10 REIT stocks among their top 10 holdings.

The iShares FTSE EPRA/NAREIT North America and SPDR DJ Wilshire have the exact same top 10 holdings as the Vanguard fund.

Only the iShares DJ Real Estate ETF has two top 10 holdings not represented in any of the other REIT funds through July 12: REIT Plum Creek Timber, and Annaly Capital Management, a mortgage-backed securities investment REIT. 

Annaly has rebounded from a low point in its value earlier in the year, but the iShares DJ Real Estate Fund is the only with a mortgage-based REIT in its top 10 holdings, and has been the second-worst-performing fund, year-to-date. Plum Creek Timber is also among the top 10 holdings in the First Trust S&P REIT ETF. It should also be noted that the iShares FTSE/NAREIT North America ETF includes exposure to Canadian REITs, but not among its top 10 holdings, and overall, the fund is 91% in U.S.-based REITs.

The message from the advisory community is clearly on the side of Vanguard and the broad-based REIT ETFs. "Don't try to be a hero," Gordon cautioned investors. An investor can find plenty of individual REIT stocks that have been on a tear, also, from medical office buildings to long-term care, but in the area of index-based REIT ETFs, this is not the time to be betting on the most risky.

Of course, for the risk-taking investor, there are many other ways to play. Barclays Global Investors also offers REIT subsector index ETFs, the iShares FTSE/NAREIT Industrial/Office (NYSEArca: FIO) and the iShares FTSE NAREIT Retail (NYSEArca: RTL). The retail REIT ETF is up 0.64% for the year, while the office/industrial REIT is down 3.17%.

And for those with a really strong stomach, there is a growing array of international and global REIT ETFs currently being pummeled by the markets, down between 16% to 44% this year, with the worst performance turned in by the Claymore/AlphaShares China Real Estate ETF (NYSEArca: TAO).

And there is always the iShares FTSE NAREIT Mortgage ETF (NYSEArca: REM), which is not surprisingly this year's worst performer, down 29.49%.

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