IndexIQ’s IQ US Real Estate Small Cap ETF (ROOF) has declared a quarterly dividend of USD0.5815 per share in late December.
At that rate, the fund’s indicated annual yield, which is the most recent quarterly yield multiplied by four, is approximately 9.40 per cent, while the yield for the trailing four quarters is 7.25 per cent, and the 30-day SEC yield as of 31 December 2013 is 5.26 per cent.
“Traditional fixed income investments faced an uncertain environment in 2013, driven by questions around the timing and impact of the Fed’s ‘tapering’ program,” says Adam Patti, chief executive of IndexIQ. “Various ‘alternative’ asset classes, including the small cap REIT space, offered ways for investors to add exposure to attractive yields that were not highly correlated with the concerns circling the Fed’s Quantitative Easing programme.”
ROOF finished the calendar year as a top-performing ETF in the real estate category. Since inception on 14 June 2011, ROOF has posted an annualised return of 14.25 per cent, compared to 7.80 per cent for the all-cap Dow Jones US Real Estate Index. The fund is broadly diversified and includes exposure to mortgage REITs, office REITs, hotel REITs, specialised REITs, retail REITs and more.
“We designed ROOF with an eye toward isolating the return and yield potential of the small cap REIT universe, as we believe it was an area that could serve investors well both in terms of delivering both income and return,” said Patti. “We’re very pleased with the year turned in by the fund as it continues to build a compelling long-term track record. The diversified nature of ROOF and its underlying index can help blunt the impact of a sell-off in one segment of the real estate marketplace. While small-cap REITs can also be attractive acquisition targets for larger REITs as they look to expand.”
ROOF pays dividends on a quarterly basis and has a net expense ratio of 0.69 per cent. For the third year in a row, and every year since its launch, ROOF paid no capital gains to investors in 2013.
“Our funds’ low volatility and low correlations with both the overall equity market and 10-year Treasuries make them an interesting option for investors who are concerned about the impact that rising rates could have on their fixed income investments,” says Patti.
