iShares U.S. REIT ETF Costs Less Than State Street Global Fund

The iShares Select U.S. REIT ETF (ICF) and the State Street SPDR Dow Jones Global Real Estate ETF (RWO) differ primarily in geographic scope and portfolio density. ICF focuses exclusively on 30 large-cap U.S. stocks, while RWO holds 224 positions with a global mandate. Both funds allow investors to gain exposure to real estate assets through the stock market without managing physical properties.

Cost and Income

ICF carries a lower expense ratio of 0.32%, compared to the 0.5% charged by RWO. This cost advantage may appeal to long-term investors. However, RWO offers a higher dividend yield of 3.5% for investors prioritizing immediate income. ICF provides a trailing 12-month dividend yield of 2.7%, based on distributions of $1.74 per share and a recent share price of approximately $64.08. RWO distributed $1.63 per share over the same period, working out to a 3.5% yield on its recent share price of about $46.28.

Portfolio Composition

The iShares fund, which launched in 2001, maintains a concentrated portfolio. Its largest positions are Equinix at 8.3%, Welltower at 8.2%, and Prologis at 8.06%. The State Street fund, launched in 2008, is more diversified. Its top holdings include Welltower at 10.2%, Prologis at 7.9%, and Equinix at 6.2%.

RWO allocates just over 70% of its holdings to the United States. The remainder includes international exposure, with 6.9% in Japanese companies and 3.7% in the United Kingdom. This global spread contrasts with ICF's exclusive focus on U.S. large-cap real estate investment trusts.

Performance Context

As of October 9, the share prices of both funds had decreased over the previous five years. ICF was down 2.5%, while RWO was down 10.4%. However, on a total return basis with dividends reinvested, ICF returned 11.37% and RWO returned approximately 7.3% over that same period.

Investors seeking broad real estate exposure may prefer RWO due to its international holdings and higher dividend yield, though its higher expense ratio could impact long-term gains. Those comfortable with concentration risk and focused on U.S. markets may find ICF's lower cost and slightly better total returns more attractive.