On Wednesday, Tidal Investments launched the iREIT – MarketVector Quality REIT Index ETF (IRET ). IRET is an REIT-focused fund; Wide Moat Research CEO Brad Thomas spearheads its creation.
“Our index is designed to provide diversified property sector and geographical exposure while targeting constituents with the best quality and value attributes. As the chief architect for the index, my number one goal is to ensure steady and growing income so investors can be more confident about their real estate investments,“ Thomas noted.
IRET tracks the performance of the MarketVector Quality REIT Index and has an expense ratio of 0.60%.
IRET as a REIT ETF
The underlying index selects its components from a universe of 100 REITs identified by Wide Moat Research. The REITs in the selection pool operate across a range of at least 10 real estate-related sectors. Next, each REIT in the selection universe is evaluated and assigned quality and value scores.
The index provider bases a REIT’s quality score on cap rate, dividend yield, loan-to-value ratio, and occupancy rate. The value score draws on a REIT’s discounted cash flows, dividend yield, price to funds from operations, and dividend yield, among other criteria, the prospectus said.
The index methodology has some sector constraints for purposes of diversification. It can select up to 24 REITs for inclusion based on quality scores, and 12 REITs based on value scores. The index generally selects common stocks of its component REITs. However, it can include up to four preferred stocks if their yields are high enough relative to those of their respective REITs’ common stocks. This is also according to the prospectus.
“The real estate sector has been hit by multiple shocks over the last few years from e-commerce’s threat to the retail sector to the work-from-home trend’s threat to the office sector,” MarketVector’s Head of Research Josh Kaplan said.
“Nonetheless, real estate remains an important component of well-diversified portfolios seeking both capital appreciation and income. The methodology driving this index will fill a gap in the US-listed real estate ETF market by seeking to provide investors with a diversified portfolio of leading REITs that have been rigorously screened for quality and valuation factors,” he added.
IRET held 35 REIT securities at launch, with the top holdings including Iron Mountain Inc. (4%), Ryman Hospitality Properties Inc. (3.9%) and Host Hotels & Resorts Inc. (3.9%).
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