Exchange-traded funds (ETFs) that focus on real estate investment trusts (REITs) are ideal for individual investors: they don’t need to sign lengthy contracts, apply for mortgages, or provide large amounts of capital, they can get a wide range of investment opportunities fast and cheap Realize a diversified property portfolio. Those looking for a more exotic pasture might consider the Canadian Real Estate Investment Trust, which first appeared 20 years ago. In addition to the usual advantages, these funds are highly liquid, traded on the Toronto Stock Exchange (TSX), and offer convincing yields with monthly payment distributions.
These three Canadian REIT ETFs have performed strongly in the past few years. All data are the latest data as of January 2, 2020. The net asset value price is calculated in Canadian dollars.
- Canadian REIT ETFs can quickly and cheaply invest in a diversified real estate portfolio.
- The three leading ETFs are iShares S&P/TSX Capped REIT Index Fund, BMO Equal Weight REITs Index ETF and Vanguard FTSE Canadian Capped REIT Index ETF.
iShares S&P/TSX Capped REIT Index ETF
iShares S&P/TSX Capped REIT Index ETF (XRE.TO) is an industry leader that aims to achieve long-term capital growth by tracking the S&P/TSX Capped REIT Index. XRE provides exposure to approximately 16 REITs in multiple sub-sectors: 30.38% of the portfolio’s market value is retail properties (the largest category), 26.52% is residential properties, 16.46% is diversified REITs, and 12.83% is commercial/office space and 10.74% are in industry.
XRE has the largest share of assets under management held by similar funds, with an asset management scale of US$1.48 billion. This figure dwarfs the assets of its second-largest competitor, which has less than $400 million in assets under management. In addition to having more assets than competitors, XRE has a significantly longer tenure because it has been in existence since 2002-eight years longer than any other Canadian REIT ETF. Its total rate of return since its establishment: 10.36%-exactly the same as its benchmark rate of return, minus a 0.61% management expense ratio.
XRE’s transaction price is approximately $19.50, with a yield rate of 3.93%, a year-to-date (YTD) daily total return rate of 20.85%, and a three-year total daily return rate of 11.76%. Its issuance rate of return is 14.02%.
BMO Equal Weight REITs Index ETF
The BMO Equal Weight REITs Index ETF (ZRE.TO) aims to achieve growth by replicating the price changes of the Solactive Equal Weight Canadian REIT Index. By using equal weight strategies, ZRE attempts to reduce the risks associated with individual securities.
ZRE was established in 2010 and holds 23 real estate investment trusts. These real estate investment trusts range from large companies such as Milestone Apartments REIT (MST-UN.TO) to small real estate such as Crombie REIT (CRR-UN.TO) company. The ETF invests in these holdings fairly evenly because the maximum weight of a particular holding is 5.09%.
In addition to spreading assets across a wide range of REITs, ZRE is also involved in six major industries, including diversification, office, residential, industrial, retail, and healthcare. From the perspective of sub-sectors, it is dominated by retail and residential properties (each accounting for 22% of the portfolio) and diversified and industrial REITs (each accounting for 18%).
ZRE’s asset management scale is 651.93 million U.S. dollars, the transaction price is approximately 24 U.S. dollars, and the distribution rate of return is 4.01%. Its year-to-date total daily return rate was 26.48%, and the three-year return rate was 14.25%. Its expense ratio is 0.61%.
Vanguard FTSE Canadian Capped REIT Index ETF
Vanguard FTSE Canadian Capped REIT Index ETF (VRE.TO) grants exposure to small, medium and large real estate companies in Canada at a low cost, even for ETFs—its expense ratio is 0.35%. VRE follows the FTSE Canada All Cap Real Estate Capped 25% index, which holds shares in many Canadian real estate companies.
Since its establishment in February 2012, VRE has accumulated AUM of USD 246.23 million. These assets are currently distributed among 18 REITs, and the top 10 only account for 77.2% of fund assets. In terms of main weighting, industrial and office REITs accounted for one third of the portfolio (33%), followed by residential (23.1%) and retail (19.2%).
Using the stock’s closing price of $34.31, the fund’s distribution rate of return is 3.16%. Its year-to-date total return rate was 18.94%, and the three-year return rate was 10.03%.