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Monday December 05, 2011
Real estate ETF that's bucking the trend
by Doug Fabian, editor Making Money Alert While the real estate market has been in the dog house since the beginning of the Great Recession, I found a fund focused on real estate that actually has been holding up reasonably well most of the year. The iShares FTSE NAREIT Residential Plus Capped Index Fund (REZ) has outperformed other real estate exchange-traded funds (ETFs) so far this year. But with the real estate sector still sluggish and its recovery slow, why has REZ been able to stand out? Here’s a brief analysis. The fund's top holdings include Equity Residential, 8.93%; Public Storage, 8.80%; HCP, 8.48%; Ventas, 8.27%; Avalon Bay Communities, 6.42%; and Health Care REIT, 4.82%. On a sector basis, the fund’s biggest real-estate holdings consist of apartment investments, 49%, while healthcare real estate accounted for 33%. The apartment sector has continued to be one of the best-performing real estate sectors in the country. As people lose their homes to foreclose, they go into rental properties. Others who are waiting for housing prices to fall further before trying to buy also rent. In addition, banks have made buying a home more difficult, as mortgage requirements are far too stringent for the average new home buyer to hurdle. These issues not only have led to people moving into rentals, but also staying in them longer. Many markets, especially those with a higher percentage of young adults and students, tend to have amazingly resilient real estate markets. REZ gives investors exposure to this sector. So, while this is not a traditional real estate ETF in the truest sense, it is one that is outperforming right now. Learn more about this financial newsletter at Doug Fabian's Making Money Alert. 
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