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Vident Financial Launches Real Estate ETF

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Vident Financial launched a new fund on Mar 27, focused on providing exposure to the real estate space of the United States equity market.

U.S. Diversified Real Estate ETF (PPTY - Free Report) seeks to track, before fees and expenses, the performance of the U.S. Diversified Real Estate Index.

Fund Characteristics

The fund’s index seeks to employ a rules based approach to offer investors a multi-factor alternative to traditional market cap-weighted real estate funds. “If you ask for the three most important factors when investing in real estate, you’ll probably hear ‘location, location, location.’ To this we’d add property type and leverage,” per a Business Wire article citing Fred Stoops, head of real estate investments at Vident.

The fund amassed $9 million in AUM within a few days of trading. It charges a fee of 53 basis points a year.  The fund’s top three holdings include Equity Residential (EQR - Free Report) , Avalonbay Communities Inc (AVB - Free Report) and Terreno Realty Corp (TRNO - Free Report) , with 3.8%, 3.4% and 3.0% exposure, respectively.

How Does it Fit in a Portfolio?

The Real Estate segment of the U.S. market has played an integral role in the expansion of the U.S. economy. Although it requires immense knowledge about the sector and bears significant risks, equity funds providing exposure to the sector are a great way to diversify traditional portfolios.  

Owing to its low correlation with other asset classes, the real estate sector is a great diversifier. Moreover, real estate investments are a great way to gain inflation protection, as rising prices increase the resale value of the property and it can also be used to generate rental income.   

Competition

The fund faces intense competition. Below we discuss a few ETFs that seek to provide exposure to the real estate sector.

iShares U.S. Real Estate ETF (IYR - Free Report)

This fund seeks to provide exposure to real estate stocks and tracks the Dow Jones U.S. Real Estate Index. It has AUM of $3.7 billion and charges a fee of 44 basis points a year.

The fund’s top three holdings are American Tower Reit Corp (AMT - Free Report) , Simon Property Group Reit Inc (SPG - Free Report) and Crown Castle International Reit Co (CCI - Free Report) with 6.3%, 4.8% and 4.5% allocation, respectively. The fund has lost 1.4% in a year and 6.5% year to date.

Real Estate Select Sector SPDR Fund (XLRE - Free Report)

This fund seeks to provide exposure to real estate stocks and tracks the Real Estate Select Sector Index. It has AUM of $2.3 billion and charges a low fee of 13 basis points a year.

The fund’s top three holdings are American Tower Reit Corp, Simon Property Group Reit Inc and Crown Castle International Reit Co with 10.1%, 7.7% and 7.3% allocation, respectively. The fund has returned 0.4% in a year but lost 3.8% year to date.

First Trust Consumer Discretionary AlphaDEX Fund (FXD - Free Report)

This fund seeks to provide exposure to real estate stocks and tracks the MSCI US REIT Index. It has AUM of $29.2 billion and charges a low fee of 12 basis points a year.

The fund’s top three holdings are Vanguard Real Estate II Index Fund VRTPX, Simon Property Group Reit Inc and Prologis Inc (PLD - Free Report) with 10.1%, 7.7% and 7.3% allocation, respectively. The fund has lost 5.6% in a year and 8.4% year to date.

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