Guggenheim’s equally weighted ETF brings smart beta to real estate

Aug 17th, 2015 | By | Category: Alternatives / Multi-Asset

Guggenheim Investments, a leading US-based exchange-traded fund issuer, has launched the S&P 500 Equal Weight Real Estate ETF (EWRE).

Guggenheim's equally-weighted ETF brings smart beta to real estate

William Belden, Managing Director of Product Development at Guggenheim Investments. (File image)

The ETF tracks the newly created S&P 500 Equal Weight Real Estate Index, which equally weights those index constituents in the S&P 500 that are classified in the real estate industry group. This group includes real estate investment trusts (REITs) and real estate management and development companies.

In contrast to direct property investing, which can involve significant capital outlays, hefty acquisition costs and long tie-up periods, the ETF offers investors a liquid, diversified and low-cost means of accessing real estate exposure.

According to William Belden, Managing Director of Product Development for Guggenheim Investments: “There are several reasons real estate can be considered an attractive asset class. Real estate securities offer potentially attractive long-term total returns coming from both capital appreciation and higher-than-average income when compared to other equities. They also provide a useful hedge against inflation as rents and values tend to increase when prices do”.

He added: “Recognizing that real estate is evolving into a separate asset class as a result of its growing importance to advisors and investors searching for income and capital appreciation and underscoring our firm’s commitment to providing clients with innovative investment solutions.”

The smart beta approach of equally weighting constituents offers an alternative, potentially lower risk, exposure to traditional market-cap weighted ETFs. “The time-tested equal weight strategy can help long-term performance by reducing the bias towards the largest individual companies within a particular cap-weighted strategy,” said Belden. “An equal-weight approach also may enhance portfolio diversification by reducing concentration risk often found in cap-weighted indices and provide a more balanced exposure across market capitalizations.”

The fund has been listed on the NYSE Arca and comes with a gross expense ratio of 0.40%.

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