Gone are the days of the 2008 housing bubble burst which shook
the foundations of the global economy. Since then, a number of
stimulus packages from central banks across the globe have helped
stimulate economic recovery and rekindle some hope in the real
estate sector as well.
Real estate has been an interesting investment option for
investors this year from a domestic U.S point of view. This can be
mainly attributed to a gradual recovery in the overall U.S economy
which has gone a long way in strengthening commercial as well as
residential real estate fundamentals (see
The Introductory Guide to Real Estate ETF
This also includes the current low interest rate environment and
moderate levels of economic growth have helped stimulate real
estate demand. All these factors have helped to increase the
revenues as well as profitability (return on equity) of companies
from the real estate industry.
Additionally from a dividend yield perspective, at present
the income starved investors have shown greater interest in this
exciting slice of the market, as the industry has a good track
record of dividend payments (see
Zacks #1 Ranked Dividend ETF: VIG
A look at the industry from a global perspective also reflects
positive trends. A series of favorable news from across the
Atlantic has gone a long way in reducing pessimism from the global
equity markets and especially in the case of the troubled euro
Also, economies from the Asia-Pacific as well as Latin American
regions are full of opportunities for investors from the
perspective of the real estate industry. Adding to the real estate
flavor in these economies is their vast domestic markets, mainly
thanks to the growing population of Asia-Pacific and Latin America,
and relatively better economic conditions.
Therefore, from a global perspective, the real estate industry
can be considered an attractive proposition, given its recent solid
performance, high dividend yields and high levels of correlation
with the broader economic conditions, which (for most economies)
still have a vast room for improvement.
For investors seeking a basket exposure to global real estate
companies, we have analyzed and highlighted two products that have
performed well this year. The
SPDR Dow Jones Global Real Estate (
Cohen & Steers Global Realty Majors ETF (
are the two highlighted ETFs from the global real estate space that
have handsomely beaten the S&P 500 on a year-to-date basis.
RWO tracks the Dow Jones Global Select Real Estate Securities
Index. The index is a market capitalization index adjusted for
float which tracks the performance of real estate stocks from the
On the other hand, GRI tracks the Cohen & Steers Global
Realty Majors Index, which in turn tracks the performance of those
companies which are the market leaders in real estate
Is it Time to Buy Build America Bond ETFs?
The former is up 17.70% whereas the latter has returned 18.30%
on a year-to-date basis as of the end of August 2012. In the
same time period, the S&P 500 is up only by around 10%. Both
these ETFs have a very strong price correlation of 0.99 between
each other. This implies that the two products have moved in the
same direction with similar magnitude, almost all the time.
This might be a helpful assertion for investors looking for a
pair trade on these two Global real estate ETFs as the trend line
drawn on the ratio of its prices is almost flat, confirming mean
reversion. Nevertheless, in terms of popularity and coverage, RWO
has an upper hand. RWO has an asset base of $516 million, compared
to just $68.45 million for GRI (see more in the
Zacks ETF Center
This might be considered a startling difference especially
considering the fact that both these products were launched in the
same time period (May 2008). Also, there is a vast difference when
it comes to their average daily volume. With 8,000 shares of GRI
exchanging hands each day, it lags behind 90,000 shares for
In terms of expenses structure, RWO charges investors 0.50%,
whereas GRI is a bit more expensive charging 55 basis points. Also,
RWO has a superior dividend yield of 2.93% compared to the GRI
yield of 2.05%. RWO has a very well diversified portfolio of 212
securities; whereas GRI holds only 75 securities (read
Is ROOF a Better Real Estate ETF?
Also, both these ETFs are heavily exposed towards investments in
the U.S. GRI accounts for almost 47% of its total assets as being
invested in the U.S. whereas RWO has a 55% domestic U.S exposure.
However, RWO is more exposed to mid and small cap companies
accounting for 66% of its total assets, on the other hand GRI
places its bets more on large cap stocks (around 71%).
RWO has a high R-Squared value of 78% against the S&P 500 on
a three year basis. Such a high correlation with the U.S. equity
market can be explained by a high allocation towards U.S
However, its counterpart GRI has an R-Squared value of only 57%
for the same time period. Therefore, investors looking to play on
diversification might want to consider GRI over RWO although either
could be great choices in order to play a return to strength in the
real estate market.
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COHEN&ST GL RLT (GRI): ETF Research Reports
SPDR-DJ W GL RE (RWO): ETF Research Reports
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