ETF Talk: Real Estate Fund Offers Unexpected Investment Opportunity

Doug Fabian

Doug Fabian is known for his expert knowledge of ETFs, bear funds and enhanced index funds to profit in any market climate.

After the housing bubble popped, most people have been wary of the real estate market. Despite this trepidation, foreclosure rates have been falling and property values have started to recover. As such, now might be a good time to revisit the real estate market, not just in the United States, but around the world. In particular, I’ve got my eye on the iShares S&P World Ex-US Property Index Fund (WPS). The exchange-traded fund (ETF) could provide an enticing investment opportunity if the market continues to recover.

After beginning the year at $28.17, the fund rose during the first quarter, soaring as high as $32.43. The share price decreased slightly during Q2 2012 before closing at $29.52 on June 26.

The iShares S&P World Ex-US Property Index Fund (WPS) seeks to perform in line with the S&P World Ex-US Property Index. The fund invests in publicly traded real estate companies in developed foreign countries such as Japan, Hong Kong and Australia. As of June 26, the year-to-date return was 10.1%. However, the fund does carry some risk, since 51.84 % of its assets are invested in Real Estate Investment Trusts (REITs) and 47.49% are invested in Real Estate Management and Development. As a result, the fund directly exposes investors to the risk of foreign real estate market fluctuations.

As of June 26, the fund’s top five holdings were: Mitsubishi Estate Co LTD, 4.40%; Westfield Group, 4.25%; Sun Hung Kai Properties, 3.68%; Cheung Kong Holdings LTD, 3.53; and Unibail-Rodamco SE, 3.42%. In addition, the fund’s geographic breakdown showed it has its largest concentration of holdings in: Japan, 23.44%; Hong Kong, 18.41%; Australia, 15.94%; Singapore, 9.50%, and United Kingdom, 8.63%.

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Even among other real estate ETFs, WPS remains attractive. First, the fund is relatively inexpensive, with a lower-than-average operating expense of 0.48%. Also, as indicated, WPS remains fairly geographically diverse, which suggests stability, even if it opens investors to the potential risks of foreign market fluctuations. As the global real estate market continues to recover, WPS could offer an appealing investment opportunity.

If you want my advice about buying and selling specific ETFs, including appropriate stop losses, please consider subscribing to my ETF Trader service. As always, I am happy to answer your questions about ETFs, so do not hesitate to email me by clicking here. You may see your question answered in a future ETF Talk.

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