VanEck Australia has launched a new ETF – the VanEck Vectors FTSE International Property (Hedged) ETF (REIT AU) – on the Australian Securities Exchange.
The fund provides exposure to real estate companies that derive more than 70% of their total revenues from rentals.
The fund is linked to an index from FTSE Russell that represents the performance of real estate investment trusts (REITs) and other property companies listed in developed markets excluding Australia.
It is also the first ETF in Australia to provide currency-hedged exposure to global real estate with the fund mitigating the risk of fluctuations relative to the Australian dollar.
The ETF may appeal to investors looking for income-producing assets as REITs typically must distribute at least 90% of their taxable income to shareholders annually in the form of dividends. Real estate has also historically been a good diversifier for stock/bond portfolios due to low correlations with global equity markets.
The fund is linked to the FTSE EPRA Nareit Developed ex Australia Rental in AUD Hedged Net Tax Index, part of the well-known FTSE EPRA Nareit Real Estate Indices – globally recognized listed real estate benchmarks which are tracked by over $340 billion in assets.
The FTSE EPRA Nareit indices are managed in partnership with the European Public Real Estate Association (EPRA) and the National Association of Real Estate Investment Trusts (Nareit), the US-based association for REITs and publicly traded real estate companies.
The fund’s index will only include REITs or property companies if they derive more than 70% of total revenues from rentals.
The index currently contains over 300 constituents and offers significant exposure to the retail (20.2%), diversified REITs (19.9%), residential (18.5%), and office (12.7%) sectors of the property market. The US makes up the largest country exposure with a weight of 62.6%, followed by Japan (9.4%) and the UK (5.3%). The top ten constituents account for 23.7% of the index weight; the largest are Simon Property Group (4.2%), Prologis (3.4%), and Public Storage (2.4%).
The fund comes with an expense ratio of 0.43%.
Arian Neiron, Managing Director and Head of Asia Pacific, VanEck, said, “We are delighted to collaborate with FTSE Russell for an Australian first. The VanEck Vectors FTSE International Property (Hedged) ETF provides investors with low-cost access to the returns of international property securities hedged into Australian dollars. This new ETF offers investors diversified exposure to listed global securities which derive the majority of their income from property rental income.”
Evan Ong, Managing Director ETP Relationships, Asia, FTSE Russell, added, “We are delighted that VanEck Australia has selected one of FTSE Russell’s real estate indices for its newly listed ETF. Investor appetite for access to international property stocks continues to grow, creating a demand for indices that reflect the commercial real estate market with the added liquidity, transparency, and regulation associated with investing in publicly traded stocks. FTSE Russell continues to create indices that are designed specifically for the Australian market.”
Investors looking for global property exposure may also wish to consider the SPDR Dow Jones Global Real Estate Fund (DJRE AU). The fund tracks the Dow Jones Global Select Real Estate Securities Index which covers REITs and real estate operating companies (REOCs) listed in developed and emerging markets. The ETF houses approximately AUD$300 million in assets under management and comes with an expense ratio of 0.50%.