Principal unveils non-traditional real estate ETF

May 25th, 2022 | By | Category: Alternatives / Multi-Asset

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Principal Global Investors has launched its first semi-transparent actively managed ETF, a real estate fund focused on non-traditional property sectors in the US.

Principal unveils non-traditional real estate ETF

Wireless towers represent one of several non-traditional real estate sectors.

The Principal Real Estate Active Opportunities ETF (BYRE US) has been listed on NYSE Arca with an expense ratio of 0.65%.

Non-traditional real estate sectors include data centers, wireless towers, delivery warehouses, medical offices and life science properties, single-family rental units, and self-storage facilities.

According to Principal, these sectors have been highly resilient in recent years due to favourable shifts in the economy and the emergence of structural themes ranging from demographics and infrastructure to globalization and technological innovation.

Todd Kellenberger, Real Estate Portfolio Manager for Principal Global Investors, said: “Non-traditional sectors now represent 64% of the public REIT market as they almost doubled their share of market cap from 2010-2020. Compared to traditional real estate sectors, non-traditional REITs have offered higher returns and higher growth over the last ten years.

“This reinforces our conviction that our semi-transparent ETF that is focused on these niche property types can be a differentiated strategy for investors seeking resilient growth and potential inflation protection.”

Principal Global Investors is ranked within the top ten managers of real estate and within the top five managers of public REITs, based on total US institutional assets under management.

In managing the ETF, the firm harnesses the expertise of its dedicated real estate investment team using a bottom-up approach that emphasizes companies poised to benefit from structural drivers. The team assesses each potential company across multiple categories including market outlook, business outlook, management skill and experience, capital structure, and income durability.

Due to its concentrated exposure to non-traditional property sectors, the ETF may serve to enhance core equity portfolios as a satellite allocation, delivering the potential for higher total returns with improved diversification.

Historically, REITs have also performed well as an inflation hedge, exhibiting stronger outperformance relative to equities during inflationary time periods.

Jill Brown, Managing Director of Principal Global Investors’ US Wealth Platform, added: “The Principal Real Estate Active Opportunities ETF combines two core strengths of Principal – active management and real estate investing – to provide clients with an innovative strategy that seeks to improve portfolio outcomes. The fund is thematic and one of the first semi-transparent ETFs that gives investors exposure to in-demand real estate sectors with the benefits of a liquid ETF structure.”

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