Key Morningstar Metrics for Xtrackers FTSE Developed Europe Real Estate UCITS ETF XDER
- : GoldMorningstar Medalist Rating
- : Above AverageProcess Pillar
- : Above AveragePeople Pillar
- : AverageParent Pillar
Xtrackers FTSE Developed Europe Real Estate ETF offers low-cost, comprehensive coverage of a sector in which passive funds have demonstrated their worth over long periods.
The fund tracks the FTSE EPRA/NAREIT Developed Europe Real Estate Index. Aside from an overweighting in the UK, it is largely representative of the available opportunity set in terms of size, sector, and geography.
The fund’s ongoing charge of 0.33% makes it much cheaper than actively managed peers and one of the cheapest exchange-traded funds available. This considerable cost advantage has not translated into superior risk-adjusted performance over the trailing five and 10 years, when the fund was in the bottom half when ranked against surviving peers.
A structural overweighting in the UK has contributed heavily to this underperformance. Actively managed peers have also managed to outmaneuver the fund over the course of the coronavirus panic. For example, they collectively underweighted Unibail-Rodamco-Westfield: Its focus on shopping centers was particularly hard-hit during the crisis, which resulted in a boost to relative returns over the crisis.
The fund’s tracking difference (fund return minus index return) is positive over most periods. This can be explained primarily by the differences in withholding tax levied on the fund and that assumed in the index methodology. The scale and resources of the passive portfolio-management operation at Xtrackers are on par with competitors of similar scale. Offering comprehensive access to the broad European (inclusive of the UK) REITs and listed property equity market for a low fee, the fund exhibits all the hallmarks of a top tracker.
Xtrackers FTSE Developed Europe Real Estate UCITS ETF: Performance Highlights
The fund has placed in the bottom half of its surviving peers on a risk-adjusted basis over the trailing five- and 10-year periods. Relative underperformance has primarily stemmed from structural geographic tilts versus peers, most notably an overweight position in Sweden. Meanwhile, the larger cash allocations held by many active peers have helped mitigate downside risk and enhance relative returns over the past five years. While beneficial in weaker markets, these cash holdings are likely to become a headwind to performance in stronger market environments.
Actively managed peers have also managed to outmaneuver the fund over certain periods of market dislocation during the course of the coronavirus panic. For example, they collectively underweighted Unibail-Rodamco-Westfield: Its focus on shopping centers was particularly hard-hit during the crisis, which resulted in a boost to relative returns over the crisis.
The fund’s tracking difference (fund return minus index return) is positive over most periods. This can be explained primarily by the differences in withholding tax levied on the fund and that assumed in the index.
