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November 15, 2017

New Constructs: Real Estate Sector 4Q17: Best and Worst

by New Constructs.

The Real Estate sector ranks tenth out of the 11 sectors as detailed in our 4Q17 Sector Ratings for ETFs and Mutual Funds report. Last quarter, the Real Estate sector was included within the Financials sector and did not receive an individual ranking. It gets our Unattractive rating, which is based on an aggregation of ratings of 12 ETFs and 194 mutual funds in the Real Estate sector as of October 11, 2017. See a recap of our 3Q17 Sector Ratings here.

Figures 1 and 2 show the five best and worst rated ETFs and mutual funds in the sector. Not all Real Estate sector ETFs and mutual funds are created the same. The number of holdings varies widely (from 23 to 166). This variation creates drastically different investment implications and, therefore, ratings.

Investors seeking exposure to the Real Estate sector should buy one of the Attractive-or-better rated ETFs or mutual funds from Figures 1 and 2.

Our Robo-Analyst technology empowers our unique ETF and mutual fund rating methodology, which leverages our rigorous analysis of each fund’s holdings.[1] We think advisors and investors focused on prudent investment decisions should include analysis of fund holdings in their research process for ETFs and mutual funds.

Figure 1: ETFs with the Best & Worst Ratings – Top 5

* Best ETFs exclude ETFs with TNAs less than $100 million for inadequate liquidity.

Sources: New Constructs, LLC and company filings

Find more research for New Constructs on Thomson ONE.

Figure 2: Mutual Funds with the Best & Worst Ratings – Top 5


* Best mutual funds exclude funds with TNAs less than $100 million for inadequate liquidity.

Sources: New Constructs, LLC and company filings

Eaton Vance Real Estate Fund (EIREX) is excluded from Figure 2 because its total net assets (TNA) are below $100 million and do not meet our liquidity minimums.

VanEck Vectors Mortgage REIT Income ETF (MORT) is the top-rated Real Estate ETF and AEW Real Estate Fund (NRFNX) is the top-rated Real Estate mutual fund. MORT earns a Very Attractive rating and NRFNX earns an Attractive rating.

PowerShares Active U.S. Real Estate Fund (PSR) is the worst rated Real Estate ETF and Rydex Real Estate Fund (RYREX) is the worst rated Real Estate mutual fund. PSR earns a Neutral rating and RYREX earns a Very Unattractive rating.

154 stocks of the 3000+ we cover are classified as Real Estate stocks.

The Danger Within

Buying a fund without analyzing its holdings is like buying a stock without analyzing its business and finances. Put another way, research on fund holdings is necessary due diligence because a fund’s performance is only as good as its holdings’ performance. Don’t just take our word for it, see what Barron’s says on this matter.


Analyzing each holding within funds is no small task. Our Robo-Analyst technology enables us to perform this diligence with scale and provide the research needed to fulfill the fiduciary duty of care. More of the biggest names in the financial industry (see At BlackRock, Machines Are Rising Over Managers to Pick Stocks) are now embracing technology to leverage machines in the investment research process. Technology may be the only solution to the dual mandate for research: cut costs and fulfill the fiduciary duty of care. Investors, clients, advisors and analysts deserve the latest in technology to get the diligence required to make prudent investment decisions.

Figures 3 and 4 show the rating landscape of all Real Estate ETFs and mutual funds.

Figure 3: Separating the Best ETFs from the Worst ETFs

Sources: New Constructs, LLC and company filings

Figure 4: Separating the Best Mutual Funds from the Worst Mutual Funds

Sources: New Constructs, LLC and company filings

This article originally published on October 11, 2017.

Disclosure: David Trainer, Kyle Guske II, and Kenneth James receive no compensation to write about any specific stock, sector or theme.

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[1] Ernst & Young’s recent white paper “Getting ROIC Right” proves the superiority of our holdings research and analytics.

Click here to download a PDF of this report.

New Constructs offers forensic-accounting reports to help investors, traders, and advisors make informed decisions. Find the research in Thomson ONE.

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