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 the healthcare-related real estate. Healthcare 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 these three ETFs below.
- 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.
1. Janus Henderson Investors Long-Term Care ETF
The 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 has 47 holdings with $23.7 million in assets under management (AUM). Since its inception, the fund's total return is 2.03%. The fund allocates roughly 50% of its holdings towards senior housing and skilled nursing REITs. Within the fund, 70.23% of holdings are concentrated in 10 companies.
The largest holding is in Welltower Inc. at a weight of 17.69%. The second-largest holding is in Ventas, Inc. with a total weight of 11.48%. 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.
According to Janus Henderson Investors, there are several reasons to invest in this ETF—namely that the population is living longer and long-term care is projected to be an economic driver. From 2010 to 2050, the population aged 85 and over is expected to increase from 5.5 million to 19 million—an almost fourfold increase. The U.S. long-term care market is projected to reach $550 billion by 2024.
2. IShares Residential and Multisector Real Estate Capped ETF
The iShares Residential Real Estate Capped ETF (REZ) allocates roughly 30% to healthcare REITs. 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.
The fund comprised 51 total holdings of which 58.6% was invested in their top 10 holdings. The ETFs largest holding is Public Storage REIT at 10.7%.
Since the fund's inception on May 1, 2007, it has produced an average annual total return of 5.77%. The fund has an expense ratio of 0.48% and manages an AUM portfolio at $376 million.
3. IShares Cohen & Steers REIT ETF
The iShares Cohen & Steers REIT ETF (ICF) is another of iShares ETFs that has exposure to the REIT sector. The fund features exposure to seven REIT segments, including an approximately 9% weight to healthcare REITs. 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 8.52%. The iShares Cohen & Steers REIT ETF held 34 positions and had over $1.84 billion in AUM.