AXS Investments has launched an ETF that targets publicly traded mortgage REITs (mREITs) that own and/or originate real estate debt. The AXS Real Estate Income ETF (NYSE Arca: RINC) tracks the performance of the Gapstow Real Estate Income Index.
RINC invests in mREITs that own commercial and residential mortgages and mortgage-backed securities. AXS Investments designed the ETF to provide a corporate junk bonds alternative.
AXS Investments CEO Greg Bassuk said that many investors seeking higher yields “have become overly reliant on corporate junk bonds.” These bonds “can bring risks with regard to their quality, duration and ties to the corporate credit cycle.”
“Those looking to diversify within that high yield bucket, this is a great complement,” Bassuk added.
See more: Q&A: AXS’s Greg Bassuk on the Long Inflation Game
Gapstow Capital Partners developed the fund’s underlying index, which is equally weighted by sector. They weighted half of the index to commercial real estate lending, and 25% to both non-agency residential real estate debt and agency residential real estate debt.
Also equally weighted are the mREITs within those sectors. The index rebalances quarterly to maintain its diversified exposure.
“Mortgage REITs have historically produced a higher yield than traditional corporate junk bonds,” said Gapstow Capital Partners CEO Chris Acito. “They’re not perfectly correlated, so there’s some diversification benefit.”
Acito added that higher yields from mREITS balance with greater volatility, which helps differentiate investors’ high yield portfolios.
RINC carries an expense ratio of 0.89%.
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