Todd Rosenbluth is directorof exchange-traded fund and mutual fund research at S&P Global MarketIntelligence.
Demandfor U.S. real estate securities remained strong in June, as exchange-tradedfunds focused on the sector gathered $1.44 billion of new money, following$1.31 billion accumulated inMay, according to ETF.comdata. The popularity of REIT ETFs persisted last month even as financials andinformation technology ETFs had net client withdrawals.
Whilereal estate securities are underweighted in many actively managed mutual fundsahead of the pending GICS sector elevation of REITs, passively managed securitiesproviding exposure to the segment had $51.55 billion in assets at the end ofJune, boosted by consistent net inflows in the first six months.
's Vanguard REITIndex ETF (VNQ) remains the largest of these ETFs, at $34.06 billion, boostedby net inflows of $1.09 billion in June. Relative to the S&P 500's5.45% year-to-date total return through July 8, the VNQ's 14.9% gain over thesame period was much stronger.
WhileBlackRock Inc.'slargest REIT product, iShares US Real Estate ETF (IYR), also outperformed theS&P 500 index, its more modest 13.1% total return is partially due to itsdifferences in holdings compared to VNQ. VNQ focuses on companies thatown traditional real estate suchas Simon Property GroupInc. and PublicStorage, while IYR holds those companies but also includesspecialty communications companies such as American Tower Corp. and amongits largest positions.
InJune, IYR experienced $1.2 million of net redemptions, while investors favoredBlackRock's more narrowly focused iShares Mortgage Real Estate Capped ETF(REM). REM gathered $118.2 million last month, adding to its total share countin Annaly Capital ManagementInc., AmericanCapital Agency Corp. and Starwood Property Trust Inc.,among other REITs.
Investorsalso added $99.6 million to Schwab US REITs (SCHH) and $54.4 million toFidelity MSCI Real Estate (FREL) in June. SCHH has the lowest expense ratio, 7basis points, among the real estate ETF universe, while cut the expense ratioto 8.4 basis points in June. SCHH remains the larger of the duo with $2.52billion in assets as of the end of June.
Meanwhile,Real Estate Select Sector SPDR (XLRE), which holds the S&P 500 REIT sector constituentsthat will be part of the pending GICS elevation, has only $13.3 million assets under management. Inmid-September, SSgA FundsManagement Inc. plansto pay Financial Select Sector SPDR (XLF) shareholders anapproximately $3.12 billion special dividend in the form of XLRE.
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