The largest global ex-U.S. REIT ETF is the SPDR Dow Jones International Real Estate ETF (RWX), which launched in December 2006 and has more than $3.6 billion in assets.
The fund employs a sampling strategy where it holds an index subset that mimics the index’s risk and return profile, a strategy that could result in unintended tracking error. It holds about 130 positions, with the top 10 assets making up about 35 percent of the portfolio.
RWX invests in developed international real estate and at the end of 2016 had a strong concentration in Europe and Japan. It also favors Australia which, according to CBRE, should have returns similar to the U.S. in 2017.
The expense ratio of 0.59 percent is higher than the ETFdb.com category average of 0.48 percent. Although trading at a higher multiple than its peers with a price-to-earnings ratio of 20.6, RWX pays a strong dividend of more than 8 percent. RWX also offers low volatility with a five-year standard deviation of 13.08 percent and a beta less than the market. Its five-year annualized market return of 6.62 percent is below the peer average of 7.42 percent, but the one- and three-year performance exceeded its peers.
The WisdomTree Global ex-U.S. Real Estate Fund (DRW) takes a different approach by focusing on assets that deliver strong dividends. This ETF tracks an index weighted by cash dividends paid, rather than the typical market-cap weighting.
Another distinguishing characteristic is that DRW invests in developed and emerging markets. At the end of 2016, three countries—Hong Kong (technically a separately administered region of China), Australia and Singapore—comprised more than 50 percent of total investments. Europe made up about 19 percent. Holding more than 200 securities and with the top 10 holdings equaling less than a quarter of the total assets, DRW is very diversified.
Trading since June 2007, DRW has amassed $76 million in assets. Currently, its market price is slightly above NAV, its p/e ratio is 13x and it has a 5.9 percent dividend yield. Its expense ratio of 0.58 percent is above its peers, while its five-year annualized performance of 6.20 percent is below the category average based on data from Yahoo!Finance. That said, its one- and three-year performance far surpassed the group.
If one wants to take their cue from CBRE’s expectations that Europe will be the best performer in 2017, investors can look to the iShares Europe Developed Real Estate ETF (IFEU). Since 2007, IFEU has focused on real estate in Europe’s developed economies. Today it holds approximately 100 names, with a high concentration—more than 70 percent of the fund—in the United Kingdom, Germany and France. The top ten investments make up 46 percent of the portfolio.
IFEU has a relatively cheap expense ratio of 0.48 percent, but because of its size (assets under management of $42 million) and low trading volume, it is less liquid than some of its larger peers. Performance has been relatively strong—its five-year annualized return of roughly 8.5 percent is at the high end of the category range.
Trading at a p/e ratio of 8x, IFEU is relatively cheap, but its trailing 12-month dividend yield of 2.70 percent is less attractive and volatility has been higher than many peers. The fund currently trades at a premium to NAV.