By tracking the Epra European property index, this ETF offers exposure to real estate and property companies in 10 European countries excluding the UK. Examples of countries that comprise the index are the Netherlands, France, Sweden, Spain and Germany. Constituent companies include French commercial property company Unibail and retail property company Rodamco Europe.
Exchange traded funds are similar to tracker funds which passively track an index but the difference is they can be traded like a share, while providing diversity of shares like an Oeic or unit trust. As ETFs are passive vehicles, they are cheaper than actively managed funds.
Property is still a popular asset class among investors but with talk of growth in the UK commercial property market possibly being at its peak, attention is now turning to other regions.
For most people, investing directly in European property would be difficult because of the costs involved, the regional knowledge needed and the problem of diversifying their portfolio when such large sums of money are required for each property. Pooling their money with other investors through an exchange-traded fund provides diversified property exposure at a lower cost than alternatives such as actively managed property funds.
ETFs allow investors to get in and out of the market quickly, which provides the liquidity that actively managed funds with direct property holdings may lack. However, some funds that invest indirectly in property through shares are actively managed, whereas this only provides exposure to the companies on the index.
Although the fund has very low charges for a property-based fund, some investors may prefer to pay a bit extra for an actively managed fund that can invest where the best opportunities are at any given moment in the economic cycle.