Hoya Capital | Income Builder | REITs & ETFs

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VNQ: A David Vs. Goliath Story

  • Real estate ETFs are an excellent option for investors seeking low-cost, liquid, and diversified exposure to real estate. ETFs can complement or "anchor" an actively-managed strategy of selecting individual REITs.
  • Our ETF Spotlight Series has taken us across the fund landscape from High Yield REIT ETFs and CEFs to newer innovative funds offering a more growth-oriented approach to real estate.
  • The plain-vanilla "Core REIT" ETFs still rule the day, however, led by Goliath VNQ. We compare VNQ to five other ETFs that offer "cheap beta" exposure to commercial real estate.
  • Due to the market-capitalization weighting system and the dynamics of the REIT sector, these ETFs tend to overweight the largest and relatively highest-valued and lowest-yielding REITs.
  • With as much as 60% of weight in its Top-10 holdings, these ETFs may not offer the level of diversification that many investors assume. The property sector exposure also varies significantly between these funds.

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