The fund added nearly 2.6% in the trailing three months while yields came in above 2.7%. XLP currently has a Zacks ETF Rank of 3 or ‘Hold’ with a Low risk outlook.
While this space was extremely popular as the year started, many have begun to think twice about the segment. This is because the possible slowdown of Fed’s asset-purchase program and the possibility of higher rates, along with a general disdain for high yielding securities, could hamper the outlook for these securities going forward (read: REIT ETFs Crushed: Time to Panic?).
Currently, the spread remains high due to the low short-term rates. But, if the spread collapses, profits could tumble for this highly leveraged space, suggesting that they too could be hurt by increased rates.
iShares FTSE NAREIT Mortgage Plus Capped Index Fund (NYSEARCA:REM)
This is the most popular mREIT ETF with about $1 billion in AUM. The fund tracks the FTSE NAREIT All Mortgage Capped Index and holds 29 securities in its basket. It charges a slightly high, 48 basis points a year in fees.
The fund is heavily concentrated across its top securities, as Annaly Capital (NLY) accounts for 18.6% of the total assets alone and American Capital Agency (AGNC) makes up for another 14.4%. The product is well spread across the market spectrum allocating 20% to large caps, 27% to mid caps and the rest to small caps.
Obviously, the yield is the real focus of this fund, as the 30-Day SEC payout comes in at a robust 12.74%. However, the ETF lost over 19% in the past three month time frame.
This article is brought to you courtesy of Eric Dutram.