Newly launched VanEck ETF dented by Fed-fueled REIT selloff

Kilroy Realty

22/09/2023 17:34

By Bansari Mayur Kamdar
       Sept 22 (Reuters) - VanEck's exchange-traded fund (ETF)
focusing on office properties edged higher on Friday, a day
after tumbling on its debut as fears of interest rates remaining
elevated added pressure to a commercial real estate sector
already hobbled by the surge in remote work.
    The VanEck Office and Commercial REIT ETF  DESK.N  fell 4.8%
on Thursday after the U.S. Federal Reserve stiffened its hawkish
monetary policy stance, slamming the real estate sector and the
Real Estate Investment Trusts (REITs) that invest in them. 
    Real estate stocks have struggled this year as the Fed's
rapid rate hikes make financing properties more expensive,
curbing demand. 
    ETFs tracking broader REITs such as Schwab US REIT  SCHH.N 
and Vanguard Real Estate Index  VNQ.N  have fallen 4.4% and 5%,
respectively, so far this week, while the S&P 500 real estate
index  .5SP60  is on track to post weekly losses of 4.7%.
    "For the discerning investor, the current situation might
just be the contrarian opportunity they've been waiting for,"
said VanEck in its blog about the ETF. 
    Commercial REITs already faced strains as the expansion of
remote work after the pandemic led to a fall in demand for
office spaces. 
    Office REITs like Boston Properties  BXP.N  and Kilroy
Realty  KRC.N  are down 10% and 15%, respectively, so far this
year.
    "These ETFs are interesting because they're not always used
for very long term holdings," said Aniket Ullal, ETF data and
analytics head at CFRA Research.
    "They may also sometimes be used more by traders for taking
tactical views or sometimes there is a demand from institutional
traders for these specialized sectors."     
    The fund has an expense ratio of 0.50%.

 (Reporting by Bansari Mayur Kamdar in Bengaluru; Editing by
Kirsten Donovan)
 ((BansariMayur.Kamdar@thomsonreuters.com; Follow on X:
@BansariKamdar;))