First Trust Advisors launched two new internationally focused exchange-traded funds [ETF] on the American Stock Exchange [AMEX] Thursday.
The First Trust FTSE EPRA/NAREIT Global Real Estate Index Fund (AMEX: FFR) is the first real estate ETF to offer truly global coverage of the REIT/real estate market. International real estate has been a hot area recently, and there are a number of ETFs in that space already, including:
- iShares S&P ex-U.S. World Property Index Fund (NYSE: WPS), which covers more than 20 countries but excludes the United States, and charges 0.48% in annual expenses;
- SPDR DJ Wilshire International Real Estate ETF (AMEX: RWX), which also covers 20 ex-U.S. countries, and has an expense ratio of 0.60%;
- WisdomTree International Real Estate Fund (AMEX: DRW), which excludes the U.S. and Canada and carries an expense ratio of 0.58%.
But FFR is the first fund to take a global bent, including REITs and real estate management companies both at in the U.S. and abroad. In fact, the United States has the heaviest weighting in the index, representing nearly 39% of the index, followed by Japan at almost 14%, and Australia at 12%. The broad index includes more than 300 components from 22 countries, and holds mostly REITs (70% of the index) and real estate holding/development companies (28% of the index).
The question for FFR is whether investors want global exposure, especially at a time when U.S. REITs are getting hit by the side effects of the subprime fallout. Even though the stocks in the fund likely have little to do with residential homes, ground zero for the current credit crunch, "real estate" has become a bad word for some investors, and they may be more comfortable with purely ex-U.S. plays. The fund charges 0.60% in expenses.
Meanwhile, the First Trust Dow Jones STOXX Select Dividend 30 Index Fund (AMEX: FDD) tracks the STOXX Select Dividend 30 Index, which covers 30 of the highest yielding companies in the broad European market STOXX 600 Index. The components are weighted by dividend yield and individual weights are capped at 15% of the index. The fund charges 0.60% in expenses.
In terms of competitors, the most closely aligned competitive fund may be the WisdomTree Europe High-Yielding Equity Fund (NYSE: DEW). That fund has a 0.58% expense ratio and tracks an index with more than 300 components from across Europe.