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Is Invesco KBW Premium Yield Equity REIT ETF (KBWY) a Strong ETF Right Now?

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A smart beta exchange traded fund, the Invesco KBW Premium Yield Equity REIT ETF (KBWY - Free Report) debuted on 12/02/2010, and offers broad exposure to the Real Estate ETFs category of the market.

What Are Smart Beta ETFs?

For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.

Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.

On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.

These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.

Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.

Fund Sponsor & Index

Because the fund has amassed over $246.74 million, this makes it one of the average sized ETFs in the Real Estate ETFs. KBWY is managed by Invesco. KBWY, before fees and expenses, seeks to match the performance of the KBW Nasdaq Premium Yield Equity REIT Index.

The KBW Nasdaq Premium Yield Equity REIT Index is a dividend weighted index seeking to reflect the performance of approximately 24 to 40 small- and mid-cap equity REITs in the US.

Cost & Other Expenses

Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.

Annual operating expenses for KBWY are 0.35%, which makes it on par with most peer products in the space.

It's 12-month trailing dividend yield comes in at 7.32%.

Sector Exposure and Top Holdings

It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

Representing 100% of the portfolio, the fund has heaviest allocation to the Real Estate sector.

Looking at individual holdings, Global Net Lease Inc (GNL - Free Report) accounts for about 6.34% of total assets, followed by Omega Healthcare Investors Inc (OHI - Free Report) and Necessity Retail Reit Inc/the (RTL - Free Report) .

Its top 10 holdings account for approximately 48.98% of KBWY's total assets under management.

Performance and Risk

The ETF has lost about -18.30% so far this year and is down about -15.87% in the last one year (as of 12/28/2022). In the past 52-week period, it has traded between $18.28 and $26.25.

The fund has a beta of 1.20 and standard deviation of 39.20% for the trailing three-year period, which makes KBWY a medium risk choice in this particular space. With about 28 holdings, it has more concentrated exposure than peers.


Invesco KBW Premium Yield Equity REIT ETF is a reasonable option for investors seeking to outperform the Real Estate ETFs segment of the market. However, there are other ETFs in the space which investors could consider.

Real Estate Select Sector SPDR ETF (XLRE - Free Report) tracks Real Estate Select Sector Index and the Schwab U.S. REIT ETF (SCHH - Free Report) tracks Dow Jones U.S. Select REIT Index. Real Estate Select Sector SPDR ETF has $4.92 billion in assets, Schwab U.S. REIT ETF has $5.62 billion. XLRE has an expense ratio of 0.10% and SCHH charges 0.07%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Real Estate ETFs.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

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