The global assets in exchange-traded funds linked to benchmark FTSE EPRA/NAREIT real estate stock indices have jumped by over 90 per cent in the past year to USD7.1bn.
Investors have been attracted into these tracker funds by high yields, quality diversified real estate exposure in a tradable form and the outperformance of listed real estate relative to general equities indices.
Fraser Hughes (pictured), research director at the European Public Real Estate Association (EPRA), says: “Investment flows into ETFs reflect general institutional and retail investor sentiment towards an asset class. The combination of real estate stocks’ attractive high yields in a low-yielding world and the chance to gain exposure to some of the best located and managed buildings in major world cities, seems to have driven the long-term outperformance of real estate relative to global equity and bond markets. On top of these factors, we’re also seeing a shift in ETF provider assets linked to FTSE EPRA/NAREIT indices, as seen by the recent switch by Lyxor, which reflects the high standards of management and transparency of our benchmarks. In addition, the vast majority of dedicated global investment managers who offer a tailored or active approach to listed real estate investment use the FTSE EPRA/NAREIT indices.”
ETFs tracing the index series are currently available via HSBC, Blackrock iShares, Deutsche Bank, Lyxor, First Trust and EasyETF.
Earlier this month Lyxor, the third largest ETF provider in Europe by assets under management, announced that it had chosen to replace the indices it uses as the basis for its Global Real Estate ETFs with the FTSE EPRA/NAREIT Developed Global Real Estate indices.
Since October 2011, the FTSE EPRA/NAREIT Global Total Return Index of developed market real estate stocks has rallied 26 per cent in euro terms (17 per cent in US dollars), while in comparison the FTSE All-World Developed Global Equities Total Return Index was up 18 per cent in euros (10 per cent in US dollars) over the past year.
