First Trust Advisors L.P. begun trading the First Trust Heitman Global Prime Real Estate ETF (NYSE Arca: PRME) on Thursday, November 12, 2015.
Here is a synopsis of the new ETF:
FUND INFORMATION:
| Symbol: PRME | Exchange: NYSE Arca |
| Name: First Trust Heitman Global Prime Real Estate ETF | Net Expense Ratio: 0.95% |
FUND OBJECTIVE:
The First Trust Heitman Global Prime Real Estate ETF is an actively managed exchange-traded fund. The fund’s investment objective is to provide long-term total return. Under normal market conditions, the Fund will seek to achieve its investment objective by investing at least 80% of its net assets (including investment borrowings) in U.S. and non-U.S. exchange-traded real estate securities, which includes real estate investment trusts (REITs), real estate operating companies (REOCs) and common stocks or depositary receipts of companies primarily engaged in the real estate industry (collectively, “Real Estate Securities”). Accordingly, the Fund is concentrated in REITs and/or real estate management and development companies (including REOCs), sub-industries of the real estate industry group. Real estate management and development companies generally derive at least 50% of their revenue from, or have at least 50% of their assets invested in, real estate, including the ownership, construction, management, or sale of real estate. The Fund will not invest directly in real estate.
The Fund seeks to provide investors access to a real estate securities portfolio consisting of shares of public companies with professional management teams that own top-tier, prime properties in the world’s dominant cities. “Prime” markets and cities are some of the world’s top cities which are recognized as “global gateway” markets that benefit from global physical and/or financial trade, have high barriers to entry, dominate their regions or countries, or provide high value niche goods and services. The key factors are location, physical specification, sustainability, tenant quality, and income stability. In practice, prime assets are also ones that are competitively sought after and command high values in both absolute and relative terms, resulting in relatively low cap rates.
The Fund’s portfolio managers will select Real Estate Securities by implementing an investment process that is outlined below:
As a first screen, all securities in the Global Industry Classification Standard (GICS) real estate industry are filtered for size and liquidity, based upon free float market capitalization for size and a threshold daily trading volumes for liquidity. The purpose of these quantitative screens is to ensure that the investment strategy can be executed in a buy and hold manner without undue stress.
In the second stage, screening is conducted using a combination of qualitative and quantitative tools. From a qualitative perspective, portfolio analysts maintain a close coverage universe and are in regular contact with the management of potential Real Estate Securities issuers, regularly visiting properties and markets to see as many of the properties in person as is reasonably possible. In addition to their own research, the analysts have access to other property experts and sell-side professionals within their organizations who also evaluate their companies. The task of the analysts is to identify those companies that meet the test of two quantitative filters. The issuers in which the Fund invests must generally have (1) more than 75% of their gross asset value in prime markets and (2) more than 50% of their assets under management in prime assets.
Executing the quantitative and qualitative screens produces a universe of companies that meet the size, liquidity, and concentration in prime markets and assets tests. From this universe of prime assets and markets, the portfolio managers’ regional teams construct a high conviction portfolio that, in the opinion of the portfolio managers, offers the best expected risk/return profile of the names within the prime universe.
Consideration for inclusion in the portfolio includes the issuer’s balance sheet, assessment of management’s acumen and the projected longterm growth profile of the company.
The Fund invests in REITs and REOCs which are companies that own and most often actively manage income-generating commercial real estate. REITs distribute most of their income to investors and therefore receive special tax considerations and are typically a highly liquid method of investing in real estate. REOCs, on the other hand, reinvest most income into their operations and therefore do not get the same benefits of lower corporate taxation that are a common characteristic of REITs.
The Fund typically invests in 25 to 100 Real Estate Securities issued by small, mid and large capitalization companies. The Fund invests in securities of issuers domiciled or operating in Asia and Europe, as well as other non-U.S. issuers, including those in emerging market countries.
The Fund intends to invest at least 40% of its net assets in securities of non-U.S. issuers and in issuers domiciled or operating in at least 3 different countries.
Top Holdings (11/12/15):
| AvalonBay Communities, Inc. | 5.66% |
| Westfield Corporation Limited | 4.99% |
| Derwent London PLC | 4.84% |
| Vornado Realty Trust | 4.71% |
| Unibail-Rodamco SE | 4.35% |
| Rexford Industrial Realty, Inc. | 4.31% |
| Federal Realty Investment Trust | 3.92% |
| Taubman Centers, Inc. | 3.82% |
| Befimmo S.C.A. | 3.29% |
| Chesapeake Lodging Trust | 3.26% |
Top Country Allocation (11/12/15):
| United States | 31.32% |
| Japan | 13.62% |
| Australia | 11.17% |
| Hong Kong | 9.39% |
| France | 9.30% |
| United Kingdom | 8.88% |
| Germany | 5.23% |
| Belgium | 3.32% |
| Singapore | 2.49% |
| Sweden | 2.45% |
Top Sub-Industry Exposure (11/12/15):
| Office REITs | 28.19% |
| Retail REITs | 19.28% |
| Real Estate Operating Companies | 14.09% |
| Diversified REITs | 11.06% |
| Industrial REITs | 9.48% |
| Diversified Real Estate Activities | 8.90% |
| Residential REITs | 5.71% |
| Hotel & Resort REITs | 3.29% |
Useful Links:
PRME Home Page
Category: Real Estate> Global Real Estate
ETFtrack comment:
Heitman Real Estate Securities LLC, Heitman International Real Estate Securities HK Limited, and Heitman International Real Estate Securities GmbH will manage the fund’s portfolio. “As investors in the real estate space for almost 50 years, we know first-hand the benefits of investing in prime real estate and prime markets around the world. While we believe owning prime real estate makes sense through all market cycles, we see now as a particularly good time to invest, as real estate investment trusts (REITs) are trading at discounts to their underlying real estate value,” said Kathy Sandstrom, Senior Managing Director of Heitman’s Public Real
Estate Securities business.
“This ETF provides a unique tool for investors to gain exposure to an actively managed portfolio of some of the most attractive prime real estate assets around in the world, in a way that’s both diversified and liquid,” said Ryan Issakainen, CFA, Senior Vice President, Exchange Traded Fund Strategist at First Trust.