JP Morgan launches US REIT ETF on Cboe

Jun 20th, 2018 | By | Category: Alternatives / Multi-Asset

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JP Morgan Asset Management has announced the launch of the JPMorgan BetaBuilders MSCI US REIT ETF (BBRE US) on Cboe BZX. The ETF tracks the MSCI US REIT Index – a reference for the performance of the US real estate investment trust (REIT) universe.

Joanna Gallegos JP Morgan

Joanna Gallegos, US head of ETFs at JP Morgan Asset Management

The index is a free-float adjusted market-cap weighted index composed of US-listed real estate investment trusts (REITs).

It is based on the parent MSCI USA IMI REITs Index, which captures the large-, mid- and small-cap segments of the US REIT market.

The securities included are those classified under the equity REITs industry (under the real estate sector) according to the Global Industry Classification Standard (GICS). With 152 constituents, it represents about 99% of the US REIT universe.

The ETF may be a suitable solution for income-seeking investors due to the high dividend yields inherent in REITs; by law US-based REITs are required to maintain dividend pay-out ratios in excess of 90%.

The index currently has a dividend yield of 4.3%.

“BBRE is a pure play on the REIT market and provides choice to investors who are seeking core real estate index exposure,” said Joanna Gallegos, US head of ETFs at JP Morgan Asset Management. “Additionally, for allocators, REITs can provide diversification benefits to traditional equity and fixed income portfolios.”

The parent index has 179 constituents versus the MSCI US REIT Index which has 152, excluding 15% of the holdings. The biggest difference in sub-sector weightings can be seen in Specialised REITs (Specialized REITs engage in the development, leasing, acquisition, and operation of properties not classified under traditional REITs such as movie theatres, timber companies, race tracks, and golf courses) where the parent holds 32.0% and the MSCI US REIT Index has just 18.2%.

The top three sub-sectors of the index are: Retail REITs (18.4%), Specialized REITs (17.9%) and Residential REITs (16.5%).

The reference index has underperformed its parent by over 5.0% year to date (as at 31 May 2018). The MSCI US REIT Index has returned -3.1% over this period versus its parent which has return 2.6%.

BBRE has a net expense ratio of 11bps making it fractionally cheaper than the largest real estate ETF in the market: the Vanguard Real Estate ETF (VNQ US), which costs 12bps. VNQ has assets under management of almost $30.5bn and was launched in 2004.

JP Morgan Asset Management’s US ETF suite now comprises 25 product offerings with over $4bn in assets under management.

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