Under The Hood: Ready For A REIT Rebound?

The story of real estate investment trusts (REITs) is at this point well documented. Bludgeoned during the financial crisis only to flourish again as anemic interest rates sent investors scurrying for yield. REITs will always be a yield play and the well-run firms in this asset do deliver for income investors. Along those lines, investors that are new to REITs or looking to diversify away from U.S. REITs would do well to take a look at today's “Under The Hood” candidate, the WisdomTree Global ex-US Real Estate Fund DRW, formerly known as the WisdomTree International Real Estate Fund. New name, same ETF as DRW with its 0.58% expense ratio and its $126.7 million in assets under management holds over 145 stocks. DRW may not offer U.S. exposure, but do not be deceived by its allocations to 25 different countries because Australia and Hong Kong account for over 44% of the ETF's weight. No other country gets double-digit representation. DRW has two big competitors, the iShares S&P ex-U.S. Property Index Fund WPS and the SPDR Dow Jones Global Real Estate ETF RWO. Year-to-date, RWO is the clear winner of the trio, up 6% while DRW and WPS are flat. DRW does have exposure to Japan and several Eurozone countries and those may be a couple of reasons the ETF has been stuck in neutral this year, but there is something to crow about with this ETF. There are various sub-sectors of the REIT universe and DRW offers exposure to a wide swath of them. Retail REITs account for over 24% of DRW's weight while diversified real estate activities, diversified REITs, real estate development and real estate operating companies all get double-digit allocations. So what DRW lacks in geographic diversity, it makes up for in sector diversity. Of course there is one big reason to be involved with DRW and that reason is also why it's easier to stomach the fund's flat performance: The yield, which is 4.15%, according to WisdomTree.com. Indeed, it may be time to get your REIT passport some stamps.