Vanguard, the king of low-cost, self-directed investing, is seeing increased competition in the real estate exchange-traded fund (ETF) marketplace with the entrance of J.P. Morgan Asset Management, the unit of JPMorgan Chase & Co. (JPM) that includes its ETF business.
According to a report in MarketWatch, earlier this week, J.P. Morgan Asset Management introduced a new ETF focused on real estate investment trusts (REITs). The JPMorgan BetaBuilders MSCI US REIT ETF (BBRE) began trading this week and tracks what is one of the most widely followed REIT benchmarks – the MSCI US REIT Index – noted the report. According to MarketWatch, the new ETF allocates more than 27% of its weighting to specialized REITs, 15.6% to retail REITs and 14% to residential REITs. The remaining 21% goes to office and healthcare REITs combined. "BBRE is a pure play on the REIT market and provides choice to investors who are seeking core real estate index exposure," Joanna Gallegos, U.S. head of ETFs at J.P. Morgan Asset Management, said in the report.
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According to MarketWatch, although there are a lot of REIT ETFs available to investors, this one is has low fees, which may be appealing to many. The JPMorgan BetaBuilders MSCI US REIT ETF has an expense ratio of 0.11%, which amounts to $11 on a $10,000 investment. The new ETF is a little cheaper than the Vanguard Real Estate ETF (VNQ), which is currently the largest real estate ETF on the market with $57.8 billion in assets under management, according to Morningstar. VNQ has an expense ratio of 0.12% and is invested 91.64% in real estate. Some of the top holdings include Simon Property Group, Inc. (SPG), American Tower Corporation (AMT) and Prologis, Inc. (PLD). JPMorgan's REIT ETF launched with $50.73 million in assets, noted the report.
The timing of JPMorgan's launch of a REIT ETF may raise some eyebrows given real estate stocks and ETFs tend to face pressure in rising interest rate environments like the current one. Vanguard's Real Estate ETF is down 3.11% year to date, according to Morningstar. Dividend-paying sectors like utilities and real estate tend to experience headwinds as the Federal Reserve raises rates. The Real Estate Select Sector SPDR ETF (XLRE) is down more than 3% since the beginning of the year, and the Utilities Select Sector SPDR ETF (XLU) is down nearly 4%. Both underperformed the S&P 500, which has increased 2.6% during that time.