Real estate investment trusts (REITs) are a type of traded security that generally invests in the ownership or financing of income-producing real estate. Within the REIT industry, one of the more popular investment choices is in healthcare-related real estate. Health care REITs invest in properties such as hospitals, medical office buildings and senior housing. Exchange traded funds (ETFs) are a commonly-used tool with which to invest, which is what many investors did when they purchased the three top ETFs below. All information updated October 1, 2019.
- Healthcare REITs can give investors a leg into both the growing healthcare sector as well as the real estate sector in the form of hospitals and elder care facilities.
- As baby boomers retire and grow older, senior housing and other medical properties are likely to see increased demand.
- REITs that specialize in the healthcare sector vary in terms of what types of properties they invest in and how many they hold.
Janus Long-Term Care ETF
The Janus Long-Term Care ETF (OLD) is the only pure-play ETF that invests in health care REITs. The fund looks to track the performance of the Solactive Long-Term Care Index, which seeks global exposure of companies that directly benefit from the growing need for long-term care services. With an aging population and increased health care technology, the need for long-term care is on the rise.
The inception date of the Janus Long-Term Care ETF was June 8, 2016. The fund had 50 holdings with $31 million in assets under management (AUM). So far, the fund has been off to a good start with a total return of 7.51% since inception. Within the fund, 71.18% of holdings are concentrated in 10 companies.
The second largest holding is in Ventas Inc. (VTR) with a total weight of 15.29%. The largest holding is Welltower Inc. (HCN) at a weight of 19.21%. Investors looking for exposure to health care companies relating to the long-term care industry through a basket of health care REITs might want to take a look at this new fund.
IShares Residential Real Estate Capped ETF
The iShares Residential Real Estate Capped ETF (REZ) has a 35% exposure to health care REITs, the second-largest exposure to health care REITs among ETFs in the market. The ETF provides investors with exposure to the U.S. Residential Real Estate Index, which is composed of residential, health care and self-storage REITs.
As of October 1, 2019, the fund comprised 44 total holdings of which 61.03% was invested in their top 10 holdings. The second-largest holding was in Welltower Inc. (HCN) at 8.34%, the fifth-largest was Ventas REIT (VTR) at 6.63%. The ETFs largest holding is Public Storage (PSA) at 9.12%
Since the fund's inception on May 1, 2007, it has produced a trailing 10-year total return of 15.13%. The fund has an expense ratio of 0.48% and manages an AUM portfolio at $573 million. It is also attractive for investors looking for a dividend, with a current yield of 2.62%.
IShares Cohen & Steers REIT ETF
The iShares Cohen & Steers REIT ETF (ICF) is another of iShares ETFs that has exposure to the REIT sector. As of October 1, 2019, the fund has over 15% of its holdings invested in health care REITs like Welltower and Ventas REIT. The fund is designed to mirror the Cohen & Steers Realty Majors Index, which has a much more diversified approach to investing in each REIT sector.
Since its inception on Jan. 29, 2001, it has provided investors with broad exposure to the U.S. real estate and REIT markets and a trailing 10-year return of 13.3%. The iShares Cohen & Steers REIT ETF had a yield of 2.34%, held 32 positions and had over $2.43 billion in AUM.