NewFunds Reitway Global Property ETF
The NewFunds Reitway Global Property ETF is one of four global property funds on the local scene and arguably the most specialised of the group. Also, there are more offshore listed property funds than local ones, which we think signals fund manager views of better economic and subsequently Reit prospects abroad.
Companies are eligible for inclusion in the index/ETF if they generate at least 75% of revenue from investment activities (property investment). In addition, their free float market capitalisation – which excludes non-tradeable shares – must be more than $50m for two consecutive months, their free float percentage at least 15% and the company’s shares must have traded on at least 75% of all of the possible trading days over a three-month period.
Interestingly, Global Property Research (GPR), the index provider for the NewFunds Reitway Global Property ETF, states that the index was constructed to outperform traditional market capitalisation weighted indices. How it aims to do this is through the exclusion of the most liquid Reits from its pool of screened Reits and to exclude the most illiquid to improve the overall liquidity of the fund. The former rule is done on the premise that the larger and more liquid property stocks tend to be included in general equity indices and that, over certain periods of time, are affected more by general equity as opposed to pure property fundamentals. Using data as of the index’s latest rebalancing date (September), the end result is an ETF portfolio with a high geographical weight in US Reits (75.1%), followed by Japan and Singapore that make up the top three regions.
While the more traditional S&P Global Property 40 (Sygnia Itrix and CoreShares Global Property ETFs) and the FTSE EPRA/NAREIT Global REIT (1nvest Global REIT Index Feeder) indices are similarly weighted to the US, the sectoral weights between funds differ with residential Reits having a higher weight in the NewFunds Reitway Global Property ETF compared to peers Sygnia Itrix Global Property and the CoreShares Global Property (ETFs with available data). One major drawback, though, is the fund’s total investment cost (TIC) of 0.69% compared to the 0.46% average we estimate using the three direct global property ETF peers.
The primary objective of the NewFunds Reitway Global Property ETF is to track and replicate a rule driven, market liquidity-based index, which aims to outperform traditional market cap weighted comparatives. The ETF is designed to give investors rand-denominated exposure to a portfolio of global listed property shares selected from the America, Asia Pacific and EMEA regions.
Fund suitability
- This fund suits investors who would like to add listed property as part of the income or yield portion of their overall ETF portfolio. Given current global economic conditions and the risky nature of equity investing, we believe it is best held in a portfolio over a long-term investment horizon.
Fees
- The Fund's total investment cost (TIC) is 0.69%
Sector allocation– top 5 (%)
Invitation Homes accounts for the highest value in the index/ETF. The top five sectors the ETF is invested in are
- Residential - (42.6%)
- Industrial - (15.7%)
- Healthcare - (13.1%)
- Diversified - (10.9%)
- Office - (10.4%)
NewFunds Reitway Global Property (JSE:NEWPRP)
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Background: Exchange-traded funds (ETFs)
Exchange-traded funds (ETFs) are passively managed investment funds that track the performance of a basket of pre-determined assets. They are traded the same way as shares and the main difference is that whereas one share gives exposure to one company, an ETF gives exposure to numerous companies in a single transaction. ETFs can be traded through your broker in the same way as shares, say, on the EasyEquities platform. In addition, they qualify for the tax-free savings account, where both capital and income gains accumulate tax free.
Benefits of ETFs
- Gain instant exposure to various underlying shares or bonds in one transaction
- They diversify risk because a single ETF holds various shares
- They are cost-effective
- They are liquid – it is usually easy to find a buyer or seller and they trade just like shares
- High transparency through daily published index constituents
Disclaimer
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