Real estate exchange-traded funds (ETFs) hold a basket of securities in the real estate industry and provide investors with a cheaper way to invest in the industry compared to other options. These funds usually pay special attention to real estate investment trusts (REITs), which are securitized portfolios of real estate. REITs provide investors with income potential and the liquidity of traditional stocks. Some of the main names in the REIT field include Vornado Realty Trust (VNO) and Welltower Inc. (WELL). Investing in these and other REITs allows investors to receive dividend distributions. Although the financial return may be lower than owning the entire building and pocketing all rental income, the risk is relatively small.
- In the past year, REITs performed slightly better than the broader market.
- The ETFs that track the best total returns in a year are NURE, REM, and MORT.
- The highest holding of the first ETF is Sun Communities Inc., and the highest holdings of the second and third ETFs are Annaly Capital Management Inc..
The REIT ETF field consists of approximately 33 ETFs traded only in the United States, excluding inverse and leveraged ETFs, and funds with assets under management (AUM) of less than US$50 million. REITs measured by the FTSE Nareit All Equity REITs Index performed slightly better than the broader market, with a total return of 33.5% in the past 12 months, while the S&P 500 index as of August 27, 2021 had a total return of 31.4%. Based on the performance of the past year, the best performing REIT ETF is Nuveen Short-Term REIT ETF (NURE). We have checked the three best REIT ETFs below. All figures below are as of August 27, 2021.
- Performance over one year: 58.3%
- Expense rate: 0.35%
- Annual dividend yield: 2.25%
- Three-month average daily volume: 40,418
- Assets under management: $73.8 million
- Date of Establishment: December 19, 2016
- Issuer: TIAA
NURE’s goal is the Dow Jones US Select Short-term REIT Index. The index is composed of US exchange-traded REITs that focus on apartment buildings, hotels, self-storage facilities, and other properties that usually have shorter lease periods than other industries. Nearly half of the fund’s holdings are apartment REITs, followed by self-storage REITs and hotel REITs. NURE’s largest holdings include Sun Communities Inc. (SUI), a real estate investment trust that acquires, operates, and develops and manufactures housing and RV communities; Mid-America Apartment Communities Inc. (MAA), a company in the southeastern United States, An apartment real estate investment trust that owns, develops, and acquires properties in the Midwest and Texas; and Camden Property Trust (CPT), an apartment REIT.
- Performance over one year: 48.3%
- Expense rate: 0.48%
- Annual dividend yield: 6.09%
- Three-month average daily volume: 563,551
- Assets under management: US$1.5 billion
- Date of Establishment: May 1, 2007
- Issuer: BlackRock Financial Management
REM is a multi-share fund targeting the FTSE Nareit All Mortgage Capped Index. The index aims to track the performance of US residential and commercial real estate mortgage loans. Therefore, REM not only focuses on REIT, but also includes other domestic real estate stocks and financial service names. The expense ratio of REM is higher than many peers. REM’s largest holdings include Annaly Capital Management Inc. (NLY), AGNC Investment Corp. (AGNC) and Starwood Property Trust Inc. (STWD), all of which are mortgage real estate investment trusts.
- Performance over one year: 47.2%
- Expense rate: 0.40%
- Annual dividend yield: 6.91%
- Three-month average daily volume: 146,815
- Assets under management: US$317.1 million
- Date of establishment: August 16, 2011
- Publisher: Van Eck Associates Corp.
MORT is a multi-share fund targeting the MVIS US Mortgage Real Estate Investment Trust Index. The index aims to track the overall performance of U.S. mortgage real estate investment trusts. Mortgage REITs are different from traditional REITs in that they do not own real estate, but generate income by issuing mortgage loans and obtaining loans or mortgage-backed securities. Therefore, these REITs have the potential for huge returns and significant risks. Just like REM, MORT’s largest holdings include Annaly Capital Management, AGNC Investment and Starwood Property Trust.
The comments, opinions and analysis expressed here are for reference only and should not be regarded as personal investment advice or advice on investing in any securities or adopting any investment strategy. Although we believe that the information provided here is reliable, we do not guarantee its accuracy or completeness. The views and strategies described in our content may not be suitable for all investors. Due to the rapidly changing market and economic conditions, all comments, opinions and analyses contained in our content are presented on the date of publication and may change without notice. This material is not intended to provide a complete analysis of every important fact about any country, region, market, industry, investment or strategy.