A smart beta exchange traded fund, the Invesco KBW Premium Yield Equity REIT ETF (KBWY) debuted on 12/02/2010, and offers broad exposure to the Real Estate ETFs category of the market.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund Sponsor & Index
The fund is managed by Invesco. KBWY has been able to amass assets over $246.69 million, making it one of the average sized ETFs in the Real Estate ETFs. This particular fund, before fees and expenses, seeks to match the performance of the KBW Nasdaq Premium Yield Equity REIT Index.
The KBW Nasdaq Premium Yield Equity REIT Index is a dividend weighted index seeking to reflect the performance of approximately 24 to 40 small- and mid-cap equity REITs in the US.
Cost & Other Expenses
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.35%.
The fund has a 12-month trailing dividend yield of 8.05%.
Sector Exposure and Top Holdings
Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.
Representing 100% of the portfolio, the fund has heaviest allocation to the Real Estate sector.
Taking into account individual holdings, Global Net Lease Inc (GNL) accounts for about 6.54% of the fund's total assets, followed by Service Properties Trust (81761L102) and Global Medical Reit Inc (37954A204).
KBWY's top 10 holdings account for about 47.22% of its total assets under management.
Performance and Risk
Year-to-date, the Invesco KBW Premium Yield Equity REIT ETF return is roughly 3.71% so far, and it's up approximately 17.84% over the last 12 months (as of 11/20/2024). KBWY has traded between $16.81 and $21.54 in this past 52-week period.
KBWY has a beta of 1.28 and standard deviation of 23.57% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 29 holdings, it has more concentrated exposure than peers.
Alternatives
Invesco KBW Premium Yield Equity REIT ETF is a reasonable option for investors seeking to outperform the Real Estate ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
Real Estate Select Sector SPDR ETF (XLRE) tracks Real Estate Select Sector Index and the Schwab U.S. REIT ETF (SCHH) tracks Dow Jones U.S. Select REIT Index. Real Estate Select Sector SPDR ETF has $7.61 billion in assets, Schwab U.S. REIT ETF has $7.93 billion. XLRE has an expense ratio of 0.09% and SCHH charges 0.07%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Real Estate ETFs.
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
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Get it free >>Invesco KBW Premium Yield Equity REIT ETF (KBWY): ETF Research Reports
Global Net Lease, Inc. (GNL) : Free Stock Analysis Report
Real Estate Select Sector SPDR ETF (XLRE): ETF Research Reports
Schwab U.S. REIT ETF (SCHH): ETF Research Reports
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
