A smart beta exchange traded fund, the Invesco KBW Premium Yield Equity REIT ETF (
KBWY Quick Quote 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?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
KBWY is managed by Invesco, and this fund has amassed over $241.18 M, which makes it one of the average sized ETFs in the Real Estate ETFs. This particular fund, 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
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.35%.
KBWY's 12-month trailing dividend yield is 8.07%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
KBWY's heaviest allocation is in the Real Estate sector, which is about 100% of the portfolio.
Looking at individual holdings, Uniti Group Inc (91325V108) accounts for about 9.12% of total assets, followed by Geo Group Inc/the (36162J106) and Taubman Centers Inc.
The top 10 holdings account for about 49.01% of total assets under management.
Performance and Risk
The ETF has lost about -20.29% and is down about -9.09% so far this year and in the past one year (as of 03/11/2020), respectively. KBWY has traded between $24 and $32.28 during this last 52-week period.
KBWY has a beta of 0.95 and standard deviation of 18.85% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 30 holdings, it has more concentrated exposure than peers.
Invesco KBW Premium Yield Equity REIT ETF is not a suitable option for investors seeking to outperform the Real Estate ETFs segment of the market. Instead, there are other ETFs in the space which investors should consider.
IShares U.S. Real Estate ETF (
IYR Quick Quote IYR - Free Report) tracks Dow Jones U.S. Real Estate Index and the Schwab U.S. REIT ETF ( SCHH Quick Quote SCHH - Free Report) tracks Dow Jones U.S. Select REIT Index. IShares U.S. Real Estate ETF has $4.02 B in assets, Schwab U.S. REIT ETF has $5.65 B. IYR has an expense ratio of 0.42% 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.
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.