Index IQ rolled out the first small-cap U.S. REIT ETF last week (6/14/11). IQ US Real Estate Small Cap ETF (NYSEARCA:ROOF) intends to provide income and complement large cap REIT exposure.
The underlying IQ US Real Estate Small Cap Index uses a float-adjusted market cap-weighted methodology. The goal is to replicate the performance of the smallest 10% of the U.S. REIT market. The index currently has 36 constituents and a yield of 5.0%.
The index constituent list will be updated at each quarterly rebalancing and currently includes REITs in the categories of mortgage 20.7%, retail 18.0%, office 17.7%, hotel 17.4%, diversified 11.7%, specialized 9.6%, and residential 4.9%.
Top holdings and current allocations for the ROOF ETF include Invesco Mortgage Capital Inc. (NYSE:IVR) 5.9%, DCT Industrial Trust Inc. (NYSE:DCT) 5.0%, Lexington Realty Trust (NYSE:LXP) 4.6%, Redwood Trust Inc. (NYSE:RWT) 4.5%, Sunstone Hotel Investors Inc. (NYSE:SHO) 4.4%, Pebblebrook Hotel Trust (NYSE:PEB) 3.9%, and Glimcher Realty Trust (GRT) 3.7%.
The introduction of ROOF brings the number of U.S.-listed real estate ETFs to 33. The largest are the Vanguard REIT ETF (NYSEARCA:VNQ) with $9.6 billion in assets and a current yield of 3.2% and iShares DJ US Real Estate (NYSEARCA:IYR) with $3.7 billion in assets and a current yield of 3.3%. (The “effective” yield for most REIT funds is often less than these “unadjusted” values because a portion of REIT distributions can be classified as return of capital.)
ROOF, which should have no overlap with VNQ and IYR, will have an initial yield of about 4.3% after the 0.69% expense ratio. The fund’s intended distribution schedule is unclear. Additional information is located in the press release (pdf), summary and fact sheet (pdf).
The prospectus (pdf) also covers IQ Japan Mid Cap ETF (RSUN), which was launched earlier this month, and nine ETFs that are not available yet: IQ Mexico Small Cap ETF, IQ Asian Tigers ETF, IQ Asian Tigers Consumer ETF, IQ Asian Tigers Small Cap ETF, IQ Asia Pacific ex-Japan Small Cap ETF, IQ Australia Mid Cap ETF, IQ Canada Mid Cap ETF, IQ Emerging Markets Mid Cap ETF, and IQ Global Precious Metals Small Cap ETF.
Disclosure covering writer, editor and publisher: No positions in any of the securities mentioned. No positions in any of the companies or ETF sponsors mentioned. No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.