Van Eck Debuts Mortgage REIT ETF

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Van Eck Global, the New York-based money management firm known for its natural resources funds, launched today a mortgage REIT ETF that focuses on companies involved with the purchase or service of commercial and residential mortgage loans.

The Market Vectors Mortgage REIT Income ETF (NYSEArca:MORT) will track Van Eck’s proprietary Market Vectors Global Mortgage REITs Index, a rules-based, capitalization-weighted benchmark comprising companies that derive at least 50 percent of their revenue from mortgage REITs. Its net expense ratio is 0.40 percent.

The entire 25-stock portfolio is allocated to REITs focused on residential and commercial mortgages, but excludes mortgage finance companies and saving accounts, the company said.

REIT ETFs have been popular and have generally performed well since the market crash of 2008, thanks in part to a steep yield curve said to be at historical levels. A fund like the Vanguard REIT ETF (NYSEArca:VNQ), for example, has gathered nearly $10 billion since its September 2004 inception, according to data compiled by IndexUniverse. VNQ costs 0.12 percent.

What’s more, the current environment of low short-term rates is expected to linger and should continue to support the yield curve, Sean Kelleher, Shay Asset Management chief investment strategist, said in a conference call.

“Agency and nonagency mortgage REITs have been the bright spots in the mortgage environment in the last couple of years,” Kelleher said, noting that dividend yields from mortgage REITs have been higher than other income-producing vehicles, including equity REITs, at about 14 percent.

Going forward, he added, mortgage REITs should be well placed to benefit from the shrinking role government-sponsored Fannie Mae and Freddie Mac are playing in the mortgage space.

“There’s a seismic change that’s going to happen in the way the U.S. manages mortgages,” Kelleher said. As Fannie Mae’s and Freddie Mac’s control of the market is reduced, mortgage REITs are at an advantage to banks in stepping into that space thanks to their cleaner balance sheets and overall clarity in their structure, he said.

“REITs should be able to keep raising capital and increase their role in the mortgage origination world,” Kelleher said. “The seeds are planted.”

MORT’s portfolio caps its largest holding at 20 percent. Among its top holdings, Annaly Capital Management leads the mix with a 19.7 percent weighting, followed by American Capital Agency, Chimera Investment and MFA Financial.

The fund adds an equity income option to Van Eck’s roster of income-generating ETFs currently populated by fixed-income-focused funds.


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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