US ETF provider Vident Financial has launched the US Diversified Real Estate ETF (PPTY US), a rules-based fund that uses stable geographic and property type targets to provide diversified exposure to US real estate.

The US Diversified Real Estate ETF tracks the performance of the US Diversified Real Estate Index.

The ETF has been listed on the NYSE Arca and is Vident’s fifth ETF.

Fred Stoops, head of real estate investments at Vident, commented, “If you ask for the three most important factors when investing in real estate, you’ll probably hear ‘location, location, location.’ To this we’d add property type and leverage”.

“The factors that matter when investing in real estate are no secret,” Stoops continued. “Yet they’re ignored by the traditional cap-weighted approach, which today has over 95% of REIT ETF assets. With the launch of PPTY, we’re looking to give investors access to a better solution: a rules-based fund that delivers diversified exposure to US real estate.”

The fund tracks the performance of the proprietary Vident US Diversified Real Estate Index.

The portfolio construction process uses data on the individual properties held by each company in the investment universe to build a portfolio diversified by location and property type. Leverage and governance factors are further included to reduce exposure to higher risk companies.

• Location: PPTY’s stable geographic targets deliver consistent diversification within each property type.
• Property Type: PPTY uses fixed allocations to each property type to ensure appropriate diversification. The largest allocations are to core property types such as residential, office, and industrial due to their strong track record of delivering the stable income, inflation protection and growth investors seek in real estate.
• Leverage: PPTY reduces allocations to companies with high debt in favour of firms with strong balance sheets.
• Governance: PPTY excludes companies with two governance risk factors—external management and a minority of their shares publicly listed.

Vince Birley, chief executive officer at Vident, added, “With all our ETFs, we seek to identify specific factors utilizing our principle based framework that can add value for investors, and we’ve done that again with PPTY. We’re delighted to introduce this innovative new fund to the marketplace, the fifth in our growing family of exchange traded funds.”

The fund has a management fee of 0.53 %.