In the U.S., the real estate sector is one of the smallest groups in the S&P 500, but real estate investment trusts (REITs) are popular among income investors. Just look at the Vanguard REIT ETF (VNQ). That exchange-traded fund (ETF) had nearly $35 billion in assets under management at the end of July, making it the largest sector ETF trading in the U.S. However, there is a wide world of real estate investments outside the U.S., and ETFs tracking those opportunities are trouncing U.S. equivalents such as VNQ this year.

While VNQ has traded slightly lower on a year-to-date basis, the WisdomTree Global ex-U.S. Real Estate Fund (DRW) is higher by 20.4%. DRW tracks the WisdomTree Global ex-U.S. Real Estate Index, which features all-cap exposure to the universe of REITs located outside the U.S. As WisdomTree points out in a recent note, a massive chunk of global real estate investments are actually found outside the U.S. (See also: Eyeing Emerging Markets REITs? See These ETFs.)

"The data actually suggests that of the $2.1 trillion market capitalization of global real estate, more than 61% (approx. $1.3 trillion) is located outside the U.S.," said the issuer. "The WisdomTree Global ex-U.S. Real Estate Index has done well in 2017 by touching upon each of these developments. It is also unique in the marketplace in that its focus extends beyond the developed world with Europe and Japan and also includes emerging market real estate."

DRW is a smart beta spin on real estate investing, as the ETF's holdings are weighted on the basis of cash dividends paid. The ETF features exposure to REITs from 32 countries with weights ranging from 0.05% to over 25%. Of the countries represented in DRW, 12 are emerging markets. Hong Kong and Australia combine for almost 37% of the ETF's weight. (See also: Introduction to International REITs.)

The ETF's emerging markets exposure has other advantages. "This creates an opportunity for emerging market real estate firms that pay large dividends to gain greater representation, and that has been the main driver of a relative over-weight in emerging market real estate and an under-weight in major developed markets such as Japan," said WisdomTree.

REITs are known for big yields. While VNQ has a tempting dividend yield of almost 4.4%, DRW's distribution rate is over 12%, according to issuer data. As of late July, DRW's index had a dividend yield that was mostly in line with VNQ, making the ex-U.S. real estate ETF's outperformance of its domestic rival this year all the more impressive. (See also: What Are the Best Real Estate REIT ETFs?)

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