Canada has two main real estate investment trust (REIT) ETFs. The largest is the iShares S&P TSX Capped REIT Index Fund (TSX:XRE). The other is a similar offering from Bank of Montreal called the BMO Equal Weight REITs Index ETF (TSX:ZRE).
Let’s take a closer look at these two products.
The iShares version is cap weighted, which means any one REIT can only consist of up to 20% of assets. It owns a total of 18 different REITs. The largest position is RioCan, which consists of 19.4% of assets. That’s followed by H&R REIT and Smart REIT, which are positions of 13.8% and 8.9%, respectively.
XRE has a trailing yield of 5.2% and charges investors a management expense fee of 0.55%. As Canada’s largest real estate ETF, it has a great deal of liquidity, trading more than a quarter million shares per day.
There are several similarities with the BMO REIT ETF. It has the exact same management fee, number of holdings, and it has a dividend of 5.3%, which is virtually identical. While it doesn’t quite have the liquidity as its competitor, average volume of more than 23,000 shares per day is still ample for most retail investors.
The big difference comes in the composition of each portfolio. The largest holding of the BMO product is Northview Apartment REIT at 5.77% of assets. That’s followed by Dream Office REIT at 5.74% and Allied Properties REIT at 5.63% of assets. BMO’s offering has more exposure to smaller REITs with no REIT getting less than 5.2% of assets.
Overall, investors looking for equal exposure should go for the BMO ETF. And investors looking for a greater weight towards the biggest REITs should check out the iShares product.
