Vanguard Real Estate ETF (VNQ US) – Portfolio Construction Methodology

The underlying MSCI US Investable Market Real Estate 25/50 Index delivers free-float market-cap-weighted exposure to U.S. equities classified in the GICS Real Estate sector (equity REITs and real estate management & development; mortgage REITs are excluded as they reside in Financials). The index spans large, mid, and small caps from the MSCI US IMI, which applies investability screens on free float and liquidity. A 25/50 diversification overlay is optimized quarterly (Feb/May/Aug/Nov): no single “group entity” (issuer plus controlled affiliates) may exceed 25% weight, and the combined weight of all constituents above 5% is constrained to 50%. A 10% buffer is applied at each review (targets ≤22.5% and ≤45%) to reduce drift between rebalances, and per-constituent weights are limited relative to the parent to minimize tracking error. Corporate events and share/float updates follow MSCI’s standard maintenance.

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