The worlds largest asset manager, BlackRock, has launched its second exchange-traded fund (ETF) which aims to mirror the risk and return profile of UK real estate.
The iShares MSCI Target UK Real Estate UCITS ETF follows on from the launch of its US real estate ETF in January.
“Real estate is a popular diversifier in portfolios, and demand for property exposure is growing as investors seek higher yielding assets,” said BlackRock.
“Traditionally investors have gained access to the asset class by investing in physical properties or real estate investment trusts (REITs).
“REITs overcome some of the challenges of investing in property, including high transaction costs and large initial investments, but they do not closely replicate the behaviour of physical real estate.”
The new ETF will buy the underlying securities in the MSCI UK IMI Liquid Real Estate index, an index which combines real estate equities with fixed income instruments.
“Work even harder”
Head of product development for iShares in Europe, the Middle East and Africa, Tom Fekete, said: “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.”
The methodology for the underlying index consists of three elements: giving higher weightings to lower volatility stocks to reduce volatility, using REITs’ balance sheets to calculate the average proportion of debt across the portfolio, and allocating to inflation-linked government bonds to reduce leverage and provide inflation protection.