Analyse: EasyETF FTSE EPRA Eurozone

Reits sind wegen der hohen Korrelation zu den globalen Aktienmärkten keine Alternative zu Immobilien-Direktinvestments. Sie bieten aber Zugang zu einem wichtigen volkswirtschaftlichen Sektor - und sie sind sehr liquide. 

Gordon Rose 21.12.2012

Rolle im Portfolio

The EasyETF FTSE EPRA Euro zone ETF provides exposure to listed real estate companies and Real Estate Investment Trusts (REITs) from the Eurozone. The FTSE/EPRA Euro zone Index has exhibited a high degree of correlation to international stock markets over the past decade; hence potential diversification benefits derived from adding this fund to one’s equity portfolio are limited. The index had a correlation coefficient of 0.72 as measured against the STOXX Europe 600 Index and 0.74 against the MSCI World USD Index over the last three years.

REITs can either be used as a core holding or as a tactical call to tilt the investor’s real property exposure to a certain part of the real estate market. Therefore, this ETF may be suitable for investors with a favourable outlook on the eurozone real estate market, and the market in France in particular as the index allocates 54% of its value to French firms.

Property ETFs offer investors exposure to a traditionally illiquid asset class that has historically exhibited stock-like returns and bond-like income streams. However, investors should be aware that direct property investments behave quite differently from investments via real estate funds; meaning that funds tend to have high correlations to stock markets and thereby limited diversification benefits for a portfolio. Nevertheless, real estate funds offer a few advantages for investors compared to a direct property investment, e.g. no required mortgage or maintenance are required and improved liquidity versus direct investment.

Fundamentale Analyse

The eurozone sovereign debt crisis continues to weigh on global markets despite the fact that the region’s financial health has been stabilised in recent months due to actions taken by the ECB.

The latest survey of purchasing executives for the month of October indicated eurozone business activity continues to contract. In addition, the November PMI, which includes both manufacturing and services, came in at 46.2, slightly higher than in October but still indicative of contraction in the economy. Contraction rates eased somewhat in France and Germany, the region’s largest economies. Moreover, the German business confidence index rose in November after declining for six consecutive months. The Ifo-Index reached 101.4, after bottoming out in October at 100.0. Market participants expected a further decline. Nevertheless, the index remains near its two and a half year low, pointing towards a weak fourth quarter for the biggest economy in the monetary union.

However, the REIT sector has been one of the best performing sectors of global equity markets this year. The FTSE EPRA/NAREIT Eurozone Index has outperformed global equities by a wide margin on a year-to-date basis, increasing 24%. By way of comparison, the STOXX Europe 600 Index has returned 16.5% and the MSCI World Index is up 13.7%. The sector has benefited from strong balance sheets and access to low-cost financing. However, with the recent loss of its second AAA-rating, the bond market in France could come under some pressure.

Volume in the European real estate market remains below last year’s levels. According to Jones Lang LaSalle, direct investment in European real estate totalled $33bn in the third quarter, reflecting a 3% decline in volume versus the previous quarter and a 22% decline relative to last year’s third quarter. However, volume in Germany increased 18% q/q but is down 29% year-on-year as the market is lacking good-quality stock, in particular in the retail sector. Meanwhile, France is down 22% q/q to $4.3bn as the second quarter had seen some very large deals. Jones Lang LaSalle expects another busy fourth quarter in Europe with a few large deals in the pipeline, which should be closing this year. At the same time, the lengthening transaction process carries some downward risk. In all, Jones Lang LaSalle expects investment volumes to drop by 10% in 2012 compared to 2011. The firm expects full year volume for 2013 to be consistent with this year’s level.

REITs in mature real estate markets, like those in Europe are mainly engaged in owning and operating real estate assets. Going forward, it will be difficult for REITs to mirror their pre-crisis performance. The industry has benefited over the last 10 years from increasing leverage, lower interest rates, rising property values, and generally strong growth in property demand. For now, the latest interest rate developments are supportive of real estate markets as the ECB cut interest rates again in July 2012 to 0.75%; marking a new historical low. However, borrowing costs will eventually rise again and thereby increase the cost of capital for REITs, creating pressure on asset values and reducing cash flows as well.

Indexkonstruktion

The FTSE EPRA Euro zone Index provides equity exposure to REITS in the Euro zone. The component stocks must derive the vast majority of their income from holding or developing property and be domiciled in the eurozone. The index is free-float market capitalisation weighted and the constituents must have a total free float adjusted market capitalisation of at least €50m. Components’ equity value traded on an official stock market—based on 3 months’ annualised volume—must be in excess of €25m and the company has to publish an annual report in English. The index is reviewed quarterly. Constituents must meet all criteria over two consecutive quarterly reviews before they can be included in the index. The average market cap of the index constituents is €1.9bn and therefore in the lower mid cap range as most REITs usually fall into this category. As of writing, the index holds 41 individual stocks and is heavily biased towards France (representing 54% of the index’s value), followed by Germany (19%) and the Netherlands (12%). As for individual holdings, the index’s largest constituent is Unibail-Rodamco (33%).

Fondskonstruktion

The EasyETF FTSE EPRA Euro zone ETF uses physical replication to track the FTSE EPRA EuroZone Index. The fund owns all the securities within the index, in the same weightings as stipulated by the index. EasyETF engages in securities lending to generate additional revenues. The lending revenue generated can partially offset the TER. The fund receives 45% of the gross revenue while EasyETF and the lending agent receive 45% and 10%, respectively. To protect the fund from the counterparty risk that results from this practice, EasyETF lends out no more than 25% and takes collateral greater than the loan value. Collateral margins vary from 102% to 115%, depending on the assets provided by the borrower as collateral. Cash received as dividends from the underlying stocks is held in the fund’s income account until it is distributed to fund holders. Distributions are made on a quarterly basis. This dividend treatment can potentially create a drag on returns in upward trending markets as dividends are not immediately reinvested into the fund. In practice this cuts both ways. It could also result in outperformance if the benchmark falls in this interim period. The fund may hold up to 20% of its NAV in securities from a single issuer in order to track the benchmark. Under exceptional market conditions the fund manager has the right to invest up to 35% of the fund’s net assets in securities from a single issuer. Even though the fund’s portfolio mainly consists of transferable securities linked to the reference index, it may also invest in negotiable debt instruments, bond instruments, interest rate instruments, equities, securities and similar assets, units in UCITS and/or other UCIs issued by companies domiciled in a Euro zone member state. The fund may also enter into index-swaps or equity swaps and futures in order to achieve its objectives.

Gebühren

The fund levies a total expense ratio (TER) of 0.45%. This lies at the upper of the range for ETFs tracking the European property market. Other potential costs associated with holding this fund which are not included in the TER include rebalancing costs, bid-ask spreads and brokerage fees.

Alternativen

As of writing, there is only one like-for-like alternative ETF from db X-trackers tracking the FTSE EPRA/NAREIT Euro Zone TR Index offering Eurozone property exposure. db X-trackers uses synthetic replication and levies a TER of 0.35%.

However, there are many ETFs tracking a variety of different pan-European property indices. The largest alternative in terms of total assets under management is the iShares FTSE/EPRA European Property ETF. The ETF uses full replication, levies a TER of 0.40% and is more suitable for investors preferring developed Europe ex-UK exposure.

Investors wishing to include UK exposure might consider the db x-trackers FTSE EPRA/NAREIT Developed Europe ETF. The ETF uses synthetic replication, levies a TER of 0.40% and is biased towards UK property firms, which represent 37 % of the index’s value.

 

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Über den Autor

Gordon Rose  ist ETF-Analyst bei Morningstar.