“Yields from mortgage REITs have been higher in recent years than those provided by equity REITs and a number of other income-oriented products,” said Jan van Eck, Principal at Van Eck Global. “We’re pleased to bring out MORT, an ETF which we think could be a valuable portfolio building tool for yield-focused investors in this low-yield environment.”
MORT is intended to track, before fees and expenses, the performance of the Market Vectors Global Mortgage REITs Index (ticker: MVMORTTR), a capitalization-weighted index that requires constituent companies to derive at least 50 percent of their revenues from mortgage REITs. This includes companies and trusts which are primarily engaged in the purchase or service of commercial or residential mortgage loans or mortgage-related securities.
The Index had 25 constituents as of July 31, 2011, all of which were REITs focused on residential mortgages, commercial mortgages or a mix of both. Unlike other indexes used in mortgage REIT-focused ETFs, the Index does not include mortgage finance companies or savings associations.
Additionally, ongoing mortgage finance reform may present a compelling opportunity for mortgage REITs. If U.S. government continues to wind down its role in the mortgage market, private financing sources, such as mortgage REITs may play a more pivotal role in the industry.
Van Eck Global also notes that mortgage REITs are not without their risks, which can include credit risk, leverage risk and prepayment risk, among others. Mortgage REITs generate income by accessing short-term funding to invest in higher-yielding, long-term mortgage securities and thus are also subject to risks from rising interest rates, since when the spread between short-term and long-term interest rates decreases, the value of a mortgage REITs may decline.
MORT carries a gross expense ratio of 0.54 percent and a net expense ratio of 0.40 percent, with expenses capped at 0.40 percent until May 1, 2013 (excludes certain expenses, such as interest). The Fund expects to make quarterly distributions to shareholders.
MORT is Van Eck’s 36th Market Vectors ETF and its first to focus on the mortgage REIT marketplace. The Fund expands Market Vectors’ income-oriented ETF lineup to 10 products, which span equity income and international, municipal and corporate bond categories — LatAm Aggregate Bond ETF (NYSE:BONO), Emerging Markets Local Currency Bond ETF (NYSE:EMLC), CEF Municipal Income ETF (NYSE:XMPT), High-Yield Municipal Index ETF (NYSE:HYD), Intermediate Municipal Index ETF (NYSE:ITM), Long Municipal Index ETF (NYSE:MLN), Pre-Refunded Municipal Index ETF (NYSE:PRB), Short Municipal Index ETF (NYSE:SMB) and Investment Grade Floating Rate ETF (NYSE:FLTR).
About Van Eck Global
Founded in 1955, Van Eck Global was among the first U.S. money managers helping investors achieve greater diversification through global investing. Today the firm continues this 55+ year tradition by offering global investment choices in hard assets, emerging markets, precious metals including gold, and other specialized asset classes.
Van Eck Global also offers mutual funds, insurance portfolios, separate accounts and alternative investments. Designed for investors seeking innovative choices for portfolio diversification, Van Eck Global’s investment products are often categorized in asset classes having returns with low correlations to those of more traditional U.S. equity and fixed income investments.
In addition, Market Vectors exchange-traded products have been offered by Van Eck Global since 2006 when the firm launched the nation’s first gold mining ETF. Today, Market Vectors ETFs and ETNs span several asset classes, including equities, fixed income (municipal and international bonds) and currency markets. Market Vectors is currently the U.S.’s sixth largest provider of ETPs and ninth largest worldwide.
Investments in mortgage REITs are exposed to the risks specific to the real estate market as well as the risks that relate specifically to the way in which mortgage REITs are organized and operated which include, among others, credit risk, interest rate risk, leverage risk, prepayment risk and U.S. federal tax requirements. Investors should be willing to accept a high degree of volatility and the potential of significant loss.
Market Vectors Global Mortgage REITs Index (the “Index”) is the exclusive property of 4asset-management GmbH, which has contracted with Structured Solutions AG to maintain and calculate the Index. Structured Solutions AG uses its best efforts to ensure that the Index is calculated correctly. Irrespective of its obligations towards 4asset-management GmbH, Structured Solutions AG has no obligation to point out errors in the Index to third parties. Market Vectors Mortgage REIT Income ETF (the “Fund”) is not sponsored, endorsed, sold or promoted by 4asset-management GmbH and 4asset-management GmbH makes no representation regarding the advisability of investing in the Fund.
The “Net Asset Value” (NAV) of a Market Vectors exchange-traded fund (ETF) is determined at the close of each business day, and represents the dollar value of one share of the fund; it is calculated by taking the total assets of the fund, subtracting total liabilities, and dividing by the total number of shares outstanding. The NAV is not necessarily the same as the ETF’s intraday trading value. Market Vectors ETF investors should not expect to buy or sell shares at NAV.
Fund shares are not individually redeemable and will be issued and redeemed at their NAV only through certain authorized broker-dealers in large, specified blocks of shares called “creation units” and otherwise can be bought and sold only through exchange trading. Creation units are issued and redeemed principally in kind. Shares may trade at a premium or discount to their NAV in the secondary market.
Investing involves substantial risk and high volatility, including possible loss of principal. An investor should consider the investment objective, risks, charges and expenses of the Fund carefully before investing. To obtain a prospectus and summary prospectus, which contains this and other information, call 888.MKT.VCTR or visit vaneck.com/etf. Please read the prospectus and summary prospectus carefully before investing.
Van Eck Securities Corporation, Distributor, 335 Madison Avenue, New York, NY 10017
Mike MacMillan/Chris Sullivan