Real estate ETFs with largest discounts? Highest fees?

Week 4: The real estate ETF investment universe

The current analysis includes a total 47 real estate ETFs, which are being tracked in terms of their monthly performance, fees, yield and AUM.

After taking over the management of the Ishare universe Blackrock is by far the largest real estate ETF fund manager by number of funds with a market share of c38%, however by AUM Vanguard has a market share of 41% compared to Blackrock (35%). Although Vanguard does not offer many real estate ETFs it is managing the currently largest real estate ETF, which has a market share of 40% alone.

Figure: Fund Universe by Fund Manager

byissuer

Source: Various, N. Lux, 2013

Most real estate ETFs are listed in the United States (c84%) and another c14% in Europe. As expected, also 68% of the funds have the U.S as their investment target, followed by 27% which focus on global strategies. Only 4% of strategies focus on Europe as an investment market.

Figure: Universe by investment target

bytargetcountry

Source: Various, N. Lux, 2013

Until now, 98% of real estate ETFs offered, follow a passive replication strategy. Most popular indices are subindices of the FTSE NAREIT or EPRA universe.

Figure: 10 Largest real estate ETFs

10largest

Fees

Fees are dependent on the fund manager and the investment strategy. Some smaller fund managers might not be as competitive in fees as larger ones. On average management fees are 46bps, with the majority being offered between 40-50bps. Within the same fund manager, the most popular fund will be offered at the lowest fees, while they might increase for certain other strategies. For example global strategies are typically priced slightly higher at 50-60bps.

Figure: 5 most expensive ETFs

5expensive

Premium/Discount to NAV

ETFs typically trade very close to their NAV. Most real estate ETFs will be trading at a slight discount of 1-20bps. There are currently only 4 real estate ETFs which are trading at a premium.

Figure: 10 largest discounts

10cheapest

While the premium/discount for property shares is often an indicator of company size and liquidity, there is no correlation between ETF fund size and its discount/premium pricing. ETFs with the lowest discounts typically have their primary listing on the NYSE and have their investment benchmark focused on the United States. The few funds currently listed on the LSE appear to have the largest discounts.

Week 5: Performance & standard deviation

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