As Rates Continue To Rise, Real Estate ETFs Are Back In Focus

We saw some heavier trading volume in several REIT based ETFs late last week, accompanied by outflows in the respective ETFs via redemptions, specifically in ICF (iShares Cohen & Steers REIT, Expense Ratio 0.35%, $3.3 billion in AUM) and IYR (iShares U.S. Real Estate, Expense Ratio 0.43%, $3.4 billion in AUM).

The two funds saw approximately $400 million flow out apiece last week amid rather heavy trading volume in both of these funds, although both have rallied in the past two sessions off of recent lows during the selling. IYR and ICF are both in the black year-to-date in terms of performance but both are substantially behind say the S&P 500 during this time frame, which is up over 10.5% presently, presumably on higher interest rate prospects.

ICF-2016-12-19

SRS (ProShares Ultra Short Real Estate, Expense Ratio and DRV (Direxion Daily Real Estate Bear 3X, Expense Ratio 0.95%), which are Daily levered “Bear” funds in the REIT space also saw greater than average turnover last week on the heavier selling in some of the benchmark “long” REIT funds, and this could be something that has legs going into year-end if portfolio managers decide to continue selling under-performers. Likewise, REK (ProShares Short Real Estate, Expense Ratio 0.95%), which is an unlevered “Bear” ETF linked to the REIT segment may catch some attention as well, although we do not see much trading in this last week.

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