iShares today launched its second European-listed exchange traded fund (ETF), which offers exposure to the UK property market. The new ETF will provide a similar risk-return-ratio to physical real estate that will enable ETF investors to further diversify their portfolios.
The group said the iShares MSCI Target UK Real Estate Ucits ETF will track an index which follows a mix of real estate investment trusts (REITs), equity and inflation-linked government bonds. iShares aims to reduce volatility by giving higher weightings to stocks with lower volatility and will use the balance sheets of REITs to calculate the average debt ratio across the portfolio of investment trusts.
The allocation to inflation-linked government bonds aims to “reduce leverage and provide inflation protection”, according to iShares. The new fund will aim to “accurately reflect the characteristics of physical real estate” and carries a total expense ratio of 0.40 percent.
Tom Fekete, head of product development for iShares across Europe, the Middle East and Africa, claims that investor demand has been increasingly turning towards properties for higher yields. According to Fekete, due to the steep barriers to entry, direct investments into the property market are not always a feasible option, which has particularly been the case for those investors who have only a small amount of capital at their disposal for investment. Fekete explains that the new iShares UK Real Estate ETF “aims to mitigate these issues in a cost-efficient manner, and offer instant access to an asset class that is otherwise considered to be illiquid”.
The launch of the UK-oriented fund comes soon after iShares launched a similar fund targeting the US real estate market . The iShares MSCI Target US Real Estate UCITS ETF offers exposure to over 4,000 real estate properties across the US, including health care facilities, as well as supermarkets and public storage, and can be considered as a general play on the US real estate market.