Fortunately the abysmal performance of the local property sector is not the symptom of a global problem. The CoreShares S&P Global Property (GLPROP) exchange-traded fund (ETF) offers property lovers an opportunity to enjoy the security of a physical investment and steady income in developed economies.
Unlike local ETFs that invest heavily in commercial real estate like shopping malls and office blocks, the GLPROP offers access to a variety of property companies. In addition to retail and office space, the ETF also offers exposure to industrial and residential property companies, health care facilities and property management companies across various economies.
The 40 constituents operate in the United States, Japan, Germany, Hong Kong, China, Australia, the United Kingdom and France for the moment. To ensure proper regional diversification, no more than 20 stocks may be included per region. There are at least five stocks for each region represented in the ETF.
At the time of writing, half of the 40 constituents are based in the United States. However, Australia, the United Kingdom and France are currently each represented by a single company. According to the ETF’s methodology, if no other companies that fit the size, liquidity and stability criteria qualify at the time of the next re-weighting, these regions will be removed from the index. Companies from the remaining developed markets that meet the criteria will then replace these. Luckily the banishment is not permanent. Once these regions can produce five companies that fit the criteria, they are welcomed back into the index.
The ETF is weighted by float-adjusted market capitalisation. That means the market capitalisation of the company is based on the publicly-available shares in each company. Bigger companies represent a larger percentage of the index. However, representation is limited to 10% of each company. To be included in the index, the companies must have a market capitalisation of at least US$1bn. An average of US$3m of the company’s shares must trade on a daily basis in the three months preceding the rebalancing dates. They should also have a positive track record of earnings and dividend payments.
Like most locally-listed offshore ETFs, this one is dollar-denominated, making currency volatility a consideration when buying. It’s also worth noting that offshore income is taxed before the money hits your account. Even within a tax-free investment account you will still be liable for the tax payable in these regions.
Remember property is an asset class on its own. Even though you can buy access to property through listed instruments, don’t forget that you’re diversifying across asset classes when you buy a property ETF. Remember to account for property investments you might hold elsewhere, including your Regulation 28-compliant retirement products and the value of your home as a percentage of your net worth. The combination of all your exposure to property makes up the asset allocation of property in your portfolio.
|ETF name||CoreShares Global Property ETF|
|Issue date||04 November 2016|
|Total investment cost||0.4%|
|ETF Benchmark||S&P Global Property 40 Index|
|Tax-free savings account||Investment allowed|
|ETF major holdings||View the full list here.|
|Performance 1 year||+4.6%|
|Performance 3 years||+15.9%|
|Performance since listing||+23.8%|
At Just One Lap, we are big fans of passive investment using ETFs. In this weekly blog, we discuss ETFs on the local market and the factors you need to consider when choosing an ETF. If you have wondered how one ETF differs from another, this is where you can find out. We explain which index each ETF tracks, what type of portfolio could benefit from holding each ETF, and how the costs will affect your bottom line.