Guggenheim Investments is staking its claim to the S&P 500 Equal Weight Real Estate Index with a
smart beta ETF that tracks the two-month-old sector benchmark.
The Guggenheim S&P 500 Equal Weight Real Estate ETF (EWRE), is the firm's 15th equal-weighted ETF, and it is the first smart beta ETF focused on the broad-market real estate sector.
The ETF joins a relatively crowded marketplace that includes 33 other index funds providing exposure to real estate investment trusts, but it stands out by equal-weighting the underlying
REIT holdings, as opposed to weighting based on market capitalization.
For example, the
$26.1 billion Vanguard REIT ETF (VNQ) and other market-cap-weighted real estate ETFs are constructed based on company size. In this case, the $58.9 billion Simon Property Group (SPG), as the largest REIT, makes up about 8% of the index and, thus, the ETF's holdings.
“I think the equal-weighting can be appealing because no company will dominate the portfolio,” said Todd Rosenbluth, director of mutual fund and ETF research at S&P Capital IQ.
“In this unique environment, it's harder for an investor to know which types of REITs are going to do best,” he added. “And the equal-weighting approach treats all REITs the same.”
Even as real estate comes under a cloud of uncertainty as the Fed creeps toward its first interest-rate hike in nearly a decade, it is seen as a stable source of income and a portfolio diversifier, according to William Belden, Guggenheim's managing director of product development.
“Real estate securities offer potentially attractive long-term total returns coming from both capital appreciation and higher-than-average income when compared to other equities,” he said. “Also, investing in real estate securities can be used as a hedge against inflation.”
The equal-weighted index on which the Guggenheim ETF is based is part of an increased focus on the real estate sector by S&P Dow Jones Indices, which
announced in November it was breaking out real estate as an 11th sub-sector of the S&P 500 Index.
The new sector, which will separate real estate companies from where they currently reside in the financial sector, will officially debut sometime next summer.
