Rolle im Portfolio
The EasyETF FTSE EPRA Euro zone ETF provides exposure to listed real estate companies and Real Estate Investment Trusts (REITs) from the Eurozone. The FTSE/EPRA Euro zone Index has exhibited a high degree of correlation to international stock markets over the past decade; hence potential diversification benefits derived from adding this fund to one’s equity portfolio are limited. The index had a correlation coefficient of 0.81 as measured against the STOXX Europe 600 Index and 0.77 against the MSCI World USD Index over the last three years. REITs can either be used as a core holding or as a tactical call to tilt the investor’s real property exposure to a certain part of the real estate market. Therefore, this ETF may be suitable for investors with a favourable outlook on the eurozone real estate market, and the market in France in particular as the index allocates 54% of its value to French firms. Property ETFs offer investors exposure to a traditionally illiquid asset class that has historically exhibited stock-like returns and bond-like income streams. However, investors should be aware that direct property investments behave quite differently from investments via real estate funds; meaning that funds tend to have high correlations to stock markets and thereby limited diversification benefits for a portfolio. Nevertheless, real estate funds offer a few advantages for investors compared to a direct property investment, e.g. no required mortgage or maintenance are required and improved liquidity versus direct investment.
Fundamentale Analyse
After the tech-bubble burst, central banks lowered interest rates in an effort to stimulate the economy, flooding the market with cheap money. As interest rates normalised, home owners struggled heavily to keep up with their mortgage payments. During the subsequent housing crisis, house prices in the US plummeted, transaction volume dropped dramatically and ultimately construction activity slowed as well. These symptoms ultimately spread globally and beyond residential real estate. Aggregate demand dropped as investors’ appetite declined. Although, REITs declined during the financial crisis due to the problems in the subprime mortgage market, most REITs had little or no direct involvement with the subprime market. The eurozone sovereign debt crisis continues to dominate headlines. After weeks of discussions and violent demonstrations the governments in the monetary union agreed on the second Greek bailout worth €130bn plus a 53.5% haircut on the ailing sovereign’s bonds. Weak Q4 2011 figures coming out of the eurozone have further fanned concerns about the resilience of the recovery. Eurozone GDP contracted by 0.3% during Q4 2011. Germany, seen as the monetary union’s economic motor, saw GDP contract by 0.2% during Q4, though it still managed to expand by 3% for the full year. France’s economy posted a surprise expansion of 0.2% in Q4 and full year growth of 1.7% in 2011. France benefited in the final three months of 2011 from better growth in investment and improved consumer spending. European real estate investors are turning their back on their home market as it becomes increasingly difficult to find value in the monetary union. According to Jones Lang LaSalle, European investors bought $1.6bn worth of real estate in the US in 2011, more than double what they invested in 2010. Nevertheless, it remains well under the $8.4bn seen in 2007 but indicates a pick up of the trend. In addition, LaSalle expects a tougher debt financing environment in 2012 as large European banks curb their real estate lending programs. Also, investment volumes in 2012 are expected to match the €118.6bn seen in 2011. REITs in mature real estate markets, like those in Europe are mainly engaged in owning and operating real estate assets. Going forward, it will be difficult for REITs to mirror their pre-crisis performance. The industry has benefited over the last 10 years from increasing leverage, lower interest rates, rising property values, and generally strong growth in property demand. For now, the latest interest rate developments are supportive of real estate markets as the ECB maintained interest rate levels during the last month of 2011 at historical lows. However, borrowing costs will eventually rise again and thereby increasing cost of capital for REITs, creating pressure on asset values and reducing cash flow as well.
Indexkonstruktion
The FTSE EPRA Euro zone Index provides equity exposure to REITS in the Euro zone. The component stocks must derive the vast majority of their income from holding or developing property and be domiciled in the eurozone. The index is free-float market capitalisation weighted and the constituents must have a total free float adjusted market capitalisation of at least €50m. Components’ equity value traded on an official stock market—based on 3 months’ annualised volume—must be in excess of €25m and the company has to publish an annual report in English. The index is reviewed quarterly. Constituents must meet all criteria over two consecutive quarterly reviews before they can be included in the index. The average market cap of the index constituents is €1.9bn and therefore in the lower mid cap range as most REITs usually fall into this category. As of writing, the index holds 40 individual stocks and is heavily biased towards France (representing 54% of the index’s value), followed by the Netherlands (16%) and Germany (14%). As for individual holdings, the index’s largest constituent is Unibail-Rodamco (33%).
Fondskonstruktion
The EasyETF FTSE EPRA Euro zone ETF uses physical replication to track the FTSE EPRA EuroZone Index. The fund owns all the securities within the index, in the same weightings as stipulated by the index. EasyETF engages in securities lending to generate additional revenues. The lending revenue generated can partially offset the TER and is split 50/50 with fund shareholders. To protect the fund from the counterparty risk that results from this practice, EasyETF takes collateral greater than the loan value. Collateral margins vary from 102% to 115%, depending on the assets provided by the borrower as collateral. Cash received as dividends from the underlying stocks is held in the fund’s income account until it is distributed to fund holders. Distributions are made on a quarterly basis. This dividend treatment can potentially create a drag on returns in upward trending markets as dividends are not immediately reinvested into the fund. In practice this cuts both ways. It could also result in outperformance if the benchmark falls in this interim period. The fund may hold up to 20% of its NAV in securities from a single issuer in order to track the benchmark. Under exceptional market conditions the fund manager has the right to invest up to 35% of the fund’s net assets in securities from a single issuer. Even though the fund’s portfolio mainly consists of transferable securities linked to the reference index, it may also invest in negotiable debt instruments, bond instruments, interest rate instruments, equities, securities and similar assets, units in UCITS and/or other UCIs issued by companies domiciled in a Euro zone member state. The fund may also enter into index-swaps or equity swaps and futures in order to achieve its objectives.
Gebühren
The fund levies a total expense ratio (TER) of 0.45%. This lies at the upper of the range for ETFs tracking the European property market.
Alternativen
As of writing, there is only one like-for-like alternative ETF from db X-trackers tracking the FTSE EPRA/NAREIT Euro Zone TR Index offering Euro zone property exposure. db X-trackers uses synthetic replication and levies a TER of 0.35%. However, there are many ETFs tracking a variety of different pan-European property indices. The largest alternative in terms of total assets under management is the iShares FTSE/EPRA European Property ETF. The ETF uses full replication, levies a TER of 0.40% and is more suitable for investors preferring developed Europe ex-UK exposure. Investors wishing to include UK exposure might consider the db x-trackers FTSE EPRA/NAREIT Developed Europe ETF. The ETF uses synthetic replication, levies a TER of 0.40% and is biased towards UK property firms, which represent 36 % of the index’s value.
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