Vanguard Launches International Real Estate ETF (VNQI)

by on November 1, 2010 | ETFs Mentioned:

Vanguard continued its blitz of new ETF products this week, rolling out an international counterpart to its ultra-popular real estate ETF (VNQ). The Vanguard Global ex-U.S. Real Estate Index Fund began trading on Monday; the new fund is available in four different share classes, including ETF shares (VNQI). The fund will seek to replicate the S&P Global ex-U.S. Property Index, a benchmark that includes real estate investment trusts (REITs) and real estate operating companies (REOCs) in emerging and developed markets outside the U.S.

“Modest exposure to real estate investments in a broadly diversified investment portfolio can help moderate overall portfolio volatility and serve as a hedge against inflation,” said Vanguard’s chief investment officer Gus Sauter in a press release. “With international real estate securities representing a growing portion of the overall real estate market, a counterpart to our domestic REIT Index Fund is a natural addition to our index fund lineup.”

VNQI joins ten other ETFs in the Global Real Estate ETFdb Category, including funds that offer both ex-U.S. exposure and those that include domestic equities among their holdings. The largest global real estate ETF is the SPDR Dow Jones International Real Estate ETF (RWX), a fund that makes its largest allocations to Australia, Japan, and Hong Kong. The index underlying VNQI consists of more than 400 individual securities from 35 different markets, including both developed and emerging economies. The new fund will charge an expense ratio of 0.35%, which will make it the cheapest fund in the ETFdb Category (the average for global real estate ETFs comes in at 52 basis points).

The launch of VNQI represents the latest expansion of the Vanguard ETF product lineup. In September the company rolled out nine ETFs linked to popular S&P indexes, including the S&P 500, S&P MidCap 400, and S&P SmallCap 600. In October, the firm debuted seven ETFs linked to popular Russell benchmarks, including the Russell 1000 Index and Russell 2000 Index [also read Three Real Estate ETFs To Watch If The IMF Is Right].

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Disclosure: No positions at time of writing.