BlackRock has launched the iShares MSCI Target UK Real Estate Ucits ETF with the aim of achieving risk and return profile similar to physical real estate. The firm has launched similar ETF providing targeted exposure to US real estate in January.
This ETF offers exposure to UK real estate with expectations to reflect the characteristics of physical real estate while preserving the liquidity and ease of access of a real estate investment trusts. It has a TER of 0.4%.
BlackRock explains its underlying index’s methodology consists of three elements : “reducing volatility by giving higher weightings to lower volatility stocks; using REITs’ balance sheets to calculate the average proportion of debt across the REITs portfolio; and, finally, allocating to inflation-linked government bonds to reduce leverage and provide inflation protection.”
Tom Fekete, head of Product Development for iShares EMEA, commented: “Investors are having to work even harder to find assets with the potential to deliver an attractive yield, and as part of this they are increasingly looking at property. Hamstrung by high barriers to entry, direct investment in real estate is not always a viable option, and this is particularly the case for those investors with a small amount of capital to invest. Our fund aims to mitigate these issues in a cost-efficient manner, and offer instant access to an asset class that is otherwise considered to be illiquid.
“We have so far seen strong interest from clients for our US REIT fund, and investors now have the ability to express views on two of the world’s major real estate markets.”
Altaf Kassam, MSCI’s head of Equity Applied Research, Americas and EMEAI, added: “The MSCI UK IMI Liquid Real Estate index aims to reflect the risk and return profile of investments in traditional real estate by combining listed real estate equities and fixed income instruments. It reflects the performance of our IPD UK real estate index and draws on the strengths of listed real estate equity indexes, such as investability and transparency.”