It has been a brutal month in the REIT world as rising rates
have crushed these high yielders. Prices for many in this space
have slumped by more than 10% in the time frame, easily
underperforming other high yield stocks, as well as several
longer dated bonds as well.
This trend has stayed intact as rates for benchmark 10 year
government debt crossed the 2.9% mark, putting the three percent
level-a mark unimaginable six months ago-- in sight. And while
the prospect of the Fed tapering looking pretty likely, investors
could see further losses in the REIT corner of the market if
yields do hit this lofty mark (see
Bet Against Real Estate with These Short REIT
Yet while the trend has certainly been poor for REITs lately,
Tuesday's trading did offer up some good news finally. Global
markets tumbled pretty much around the world leading to a flight
This helped to boost precious metals on the day, but the real
focus was again on the Treasury market. Global investors
seemingly piled into U.S. government debt pushing down rates
close to the 2.8% level.
As you can imagine, REIT investors rallied around this news
pushing this sector higher on the day. In fact, besides some
continued strength in the commodity space-specifically in the
miners-REITs were actually leading for the session (see
all the Real Estate ETFs here
For broad exposure to the REIT market, investors can look to
any number of REIT
currently on the market. These have been crushed lately, but if
these trends continue may be decent short term picks, assuming
rates continue to consolidate.
Below, we highlight four of the most popular products in the
space for those who want a little more information on this
Vanguard REIT ETF (
This is easily the most popular REIT ETF on the market with
$16.6 billion in assets under management. The ETF is also a cheap
choice as costs come in at just 10 basis points a year for this
In total, the product holds about 125 REITs in its basket,
with a roughly equal breakdown between large caps and then
everything else. Specialized REITs take the top spot (28.8%),
followed by retail REITs (27.7%) and then residential REITs
The ETF was up 2.5% for the session, though the product is
still down 10.2% over the past one month time frame. Still, the
annual yield remains robust at 3.9% for VNQ.
iShares U.S. Real Estate ETF (
This product is also a popular choice in the REIT market, as
volume is usually above 11 million shares a day. IYR is a bit
pricier than its counterpart though, as costs come in at 46 basis
points a year (see
The Comprehensive Guide to REIT ETFs
Total holdings come in just below 100 securities, though the
product does a solid job of spreading out assets, as just under
40% are in the top ten. Specialty REITs again take the top spot
(just under 30%), while retail and industrial round out the top
three at just about 20% each.
This ETF added about 2.8% in Tuesday trading, while its one
month loss comes in at 9.7%. The product does pay out a little
less in yield though, coming in at 3.9% in 30-Day SEC terms and
3.8% for a 12 month yield look.
iShares Cohen & Steers REIT ETF (
For another iShares look at the REIT market, investors have
ICF. This product tracks the Cohen & Steers Realty Major
Index, a benchmark of just 30 REITs charging investors 35 basis
points a year in fees for the exposure.
This product is heavily focused on large cap securities, as
just one-third of the total is devoted to mid caps or smaller.
Top individual holdings include Simon Property Group (SPG),
Public Storage (PSA), and HCP Inc. (HCP), and these three combine
to account for 21.8% of the total.
ICF is up roughly 2.4% in Tuesday trading, though it is still
down 10.8% in the trailing one month time frame. In terms of
yield, both the 30-Day SEC Yield and the 12-month yield come in
around the 3.0% mark (see
REIT ETFs Crushed: Time to Panic?
DJ Wilshire REIT ETF (
SPDR's entrant in the real estate market is also quite popular
as more than $2 billion is invested in the product while average
daily volume comes in at roughly 200,000 shares a day. This
product, which follows the Dow Jones U.S. Select REIT Index, is
also a cheap choice, charging investors just 25 basis points a
year in fees.
Once again this is a large cap focused product with small and
mid caps making up roughly 45% of the assets. Top sectors go
towards regional malls, apartments, and healthcare, all of which
make up at least 14.6% of assets.
The ETF added roughly 2.5% in Tuesday trading, though it has
lost about 10.4% in the past month. For yield, this fund is
currently sporting a 3.4% 30-Day SEC payout, while the annual
payout comes in at 3.3%.
A rising rate environment has been terrible news for REIT
ETFs, pushing many down in recent weeks. Investors are clearly
thinking twice about the space given the rising expectations for
tapering, and concerns over housing in general with higher rates
3 ETFs for Rising Interest Rates
While this has been largely the trend as of late, REIT
investors received a temporary respite from the poor trading in
Tuesday's session. REIT ETFs surged on this day as global markets
retreated, and U.S. yields followed.
Although it is unclear if this can continue-especially with
tapering pressures-it is good to see REITs finally having a solid
trading session, in what has otherwise been a pretty rough period
for this once-loved sector.
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ISHARS-C&S REIT (ICF): ETF Research
ISHARS-US REAL (IYR): ETF Research Reports
SPDR-DJ W REIT (RWR): ETF Research Reports
VIPERS-REIT (VNQ): ETF Research Reports
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