Real estate exchange-traded funds (ETFs) hold baskets of securities in the real estate sector, providing investors with a way to invest in an otherwise high-cost area. These funds often focus specifically on real estate investment trusts (REITs), which are securitized portfolios of real estate properties that offer income potential associated with real estate as well as the liquidity of traditional stocks. Some of the major names in the REIT space include Vornado Realty Trust (VNO) and Welltower, Inc. (WELL). Investing in these and other REITs allows investors to receive dividend distributions. While the financial returns could be lower than owning an entire building and being able to pocket all the income, there is less risk.
There are about 28 ETFs focused on the REIT universe, after excluding leveraged and inverse ETFs as well as funds with less than $50 million in assets under management (AUM). The best REIT ETF for Q3 2020 is the Pacer Benchmark Data & Infrastructure Real Estate SCTR ETF (SRVR). All numbers in this story are as of May 10, 2020. We examine the top 3 REIT ETFs below. We note that two of these funds have provided negative total returns for the trailing 12 months, but these ETFs have nonetheless outperformed their peers in the REIT ETF universe in the midst of recent market turmoil.
- Performance over 1-Year: 19.8%
- Expense Ratio: 0.60%
- Annual Dividend Yield: 1.66%
- 3-Month Average Daily Trading Volume: 280,811
- Assets Under Management: $583.9 million
- Inception Date: May 15, 2018
- Issuing Company: Pacer Financial
SRVR tracks the Benchmark Data & Infrastructure Real Estate SCTR Index, an index of U.S.-listed companies deriving at least 85% of revenue from real estate operations specifically in the data and infrastructure areas. SRVR is a multi-cap growth fund focused on North America. As of May 10, 2020, the ETF's top three holdings include Equinix Inc. (EQIX), a colocation space REIT; Crown Castle International Corp. (CCI); and American Tower Corp. (AMT), the latter two of which are wireless communications REITs.
- Performance over 1-Year: -3.5%
- Expense Ratio: 0.13%
- Annual Dividend Yield: 3.61%
- 3-Month Average Daily Trading Volume: 11,070,205
- Assets Under Management: $4.6 billion
- Inception Date: October 7, 2015
- Issuing Company: State Street SPDR
The Real Estate Select Sector SPDR Fund tracks the Real Estate Select Sector index, a market-cap-weighted, multi-cap index of both REITs and real estate stocks focused on the U.S. Currently, the top three holdings for XLRE include American Tower, Crown Castle International, and Prologis Inc. (PLD).
- Performance over 1-Year: -9.0%
- Expense Ratio: 0.34%
- Annual Dividend Yield: 3.01%
- 3-Month Average Daily Trading Volume: 139,298
- Assets Under Management: $1.8 billion
- Inception Date: January 29, 2001
- Issuing Company: iShares
ICF tracks the Cohen & Steers Realty Majors Index, an index of approximately 30 of the biggest players in U.S. REIT space. ICF is the oldest REIT ETF in this list. As of May 10, 2020, the top holdings for ICF include Equinix, American Tower, and Prologis.