Key Morningstar Metrics for iShares US Property Yield UCITS ETF IUSP
- : SilverMorningstar Medalist Rating
- : Above AverageProcess Pillar
- : Above AveragePeople Pillar
- : Above AverageParent Pillar
Supported by its low fee and representative beta exposure, iShares US Property Yield ETF has proved itself a standout option within the property indirect North America Morningstar Category.
Even though it applies a light dividend screen, it retains the characteristics of a plain-vanilla market-cap-weighted passive strategy in a category where active managers have struggled to distinguish themselves over long periods. The FTSE EPRA Nareit US Dividend+ Index provides exposure to US REITs and listed real estate companies that have been screened by their one-year forecast dividend yield. The constituents must have a forecast dividend yield of at least 2%, which arguably represents a low hurdle given the obligation for US REITs to maintain high dividend-payout ratios.
At the time of rating, the market-cap-weighted index held 87 of the 94 securities included in the unscreened FTSE EPRA Nareit US Index, so it closely resembles and retains the benefits of a purely passive offering, namely, that it is broadly diversified and representative of the sector.
With an ongoing charge of 0.40%, the fund is among the very cheapest offerings in the category. The fund has outstripped surviving category peers on a risk-adjusted basis over three and five years but lagged over 10 years. The small number of surviving funds over the trailing 10 years means we shouldn’t read too much into performance over that period in this instance.
Given this exchange-traded fund’s low fee and largely representative exposure, we remain confident that it will outshine rivals if held for a full market cycle.
Like most Ireland-domiciled US-focused index funds, this ETF regularly outperforms its index because it enjoys a better withholding tax rate on dividends than the FTSE EPRA Nareit US Dividend+ Net Return Index.
IShares has a seasoned passive management team befitting the dominant ETF provider in Europe. The team can leverage market-leading technology and a well-oiled securities-lending program while managing its funds.
iShares US Property Yield UCITS ETF: Performance Highlights
The fund has beaten its surviving property indirect North America category peers on a risk-adjusted basis over the trailing three and five years but has lagged over 10 years.
It should be noted that the property indirect North America category is relatively narrow. More than half are passive. Just five surviving funds have registered a 10-year track record.
This means it is difficult to draw concrete conclusions about long-term relative performance. However, given the fund’s low fee and representative exposure, we remain confident the fund will outshine rivals if held for a full market cycle. Like most Ireland-domiciled US-focused index funds, this ETF regularly outperforms its index because it enjoys a better withholding tax rate on dividends than the FTSE EPRA Nareit US Dividend+ Net Return Index. It also benefits from securities-lending activities.
