Guggenheim Launches First Smart Beta Real Estate ETF

Guggenheim Investments, the eighth-larges U.S. issuer of exchange traded funds, is unveiling an ETF industry first today with the debut of the Guggenheim S&P 500 Equal Weight Real Estate ETF EWRE.

The Guggenheim S&P 500 Equal Weight Real Estate ETF is the first smart or strategic beta real estate ETF to come to market. EWRE comes to market less than two months after Standard & Poor's created the ETF's underlying index, the S&P 500 Equal Weight Real Estate Index. That index includes real estate companies and real estate investment trusts (REITs), but excludes mortgage REITs.

Equal-weight ETFs bolster portfolio diversification while mitigating single-stock risk. Today, investors can choose from scores of equal-weight broad market ETFs tracking well-known indexes, such as the S&P 500 and Nasdaq 100, as well as equal-weight industry and sector funds.

To paraphrase lame corporate lingo, Guggenheim is “getting out in front of it” with the launch of EWRE. “It” being the addition of real estate as the eleventh sector in the Global Industry Classification Standard (GICS). Last year, S&P and MSCI announced real estate would be separated from financial services and become a standalone sector. That change becomes official on Aug. 16, 2016, meaning EWRE will have a track record of just over a year by the time real estate stands on its own within GICS.

EWRE's underlying index had 25 constituents with a median market value of $17.8 billion at the end of July, according to S&P data. The largest holding in the index accounted for 4.3 percent of the benchmark's weight with the top 10 holdings combining for 41.5 percent of the index's weight. 

EWRE's underlying portfolio will be comprised primarily of equity REITs, which have a history of providing consistent, above-average dividends, which can be used to meet current income needs or reinvested to accumulate wealth, said Guggenheim Managing Director William Belden in a statement.

Chicago-based Guggenheim is one of the dominant purveyors of equal-weight ETFs, both in number of funds and assets under management. EWRE is the firm's fifteenth equal-weight ETF and as of July 31, Guggenheim's lineup of strategic beta ETFs, including equal-weight funds, had a combined $18.7 billion in assets under management.

The $10.9 billion Guggenheim S&P 500 Equal Weight ETF RSP is one of the most recognizable equal-weight broad market ETFs, but several of Guggenheim's equal-weight sector funds have developed widespread followings, including the Guggenheim S&P Equal Weight Healthcare ETF RYH and the Guggenheim S&P 500 Equal Weight Technology ETF RYT.