Both the FlexShares Global Quality Real Estate Index Fund (GQRE +0.17%) and iShares Global REIT ETF (REET +0.00%) target global real estate equities, providing exposure to real estate companies and real estate investment trusts (REITs) worldwide. This comparison highlights their differences in cost, performance, risk, and portfolio composition, helping investors assess which may better fit their needs.

Snapshot (cost & size)

*Beta measures price volatility relative to the S&P 500; beta is calculated from five-year weekly returns.

GQRE costs investors three times more in expenses than REET, but it currently (as of Jan. 8) yields higher returns and dividends.

Performance & risk comparison

What's inside

Established in 2014, REET is the largest global real estate ETF by total assets and average volume, currently holding 377 assets around the world. Its largest positions are Welltower (WELL 0.12%), Prologis  (PLD +0.77%), and Equinix (EQIX +2.36%), collectively making up approximately 20% of the ETF's total holdings.

Created nearly a year earlier, GQRE shares similar holdings with REET, but its top three include American Tower Corporation (AMT 1.07%), Digital Realty Trust (DLR +3.67%), and Public Storage (PSA +2.59%). With 150 total holdings, GQRE is designed to maximize higher-quality real estate assets than the typical global real estate ETF.

What this means for investors

Investors should be aware of the criteria GQRE uses for its holdings. The ETF tracks the Northern Trust Global Quality Real Estate Index (NTGQRE), an underlying index that selects securities within the real estate sector based on value, momentum, and a quality factor that comprises an analysis of profitability, management efficiency, and cash flow. The objective with Northern Trust's strategy is to sustain long-term capital appreciation while mitigating risk.

This criteria seems to be successful for GQRE even throughout a turbulent real estate market, which has impacted gains of various assets within the sector. In both 12-month and 5-year spans, GQRE has outperformed REET in terms of price gains. Its price is also currently about 20% higher since inception in 2013, while REET's is only up 0.68% since 2014. For better performance, GQRE is currently the more ideal investment. But if investors prefer a lower expense ratio and broader real estate exposure, REET may be more suitable.

Glossary

ETF (Exchange-traded fund): A pooled investment that trades on stock exchanges like a single stock.
Expense ratio: The annual fee a fund charges investors, expressed as a percentage of assets invested.
Assets under management (AUM): The total market value of all assets a fund manages for investors.
Dividend yield: Annual dividends paid by a fund divided by its current share price, shown as a percentage.
REIT (Real estate investment trust): A company that owns or finances income-producing real estate and pays out most earnings as dividends.
Global real estate equities: Stocks of real estate companies and REITs listed on exchanges around the world.
Beta: A measure of how much an investment’s price moves relative to a benchmark index like the S&P 500.
Max drawdown: The largest peak-to-trough decline in an investment’s value over a specific period.
Total return: Investment performance including price changes plus all dividends and distributions, assuming they are reinvested.
Developed markets: Economies with mature financial systems and higher income levels, such as the U.S., Japan, and Western Europe.
Emerging markets: Countries with developing economies and financial markets that may offer higher growth and higher risk.
Portfolio concentration: The degree to which a fund’s assets are invested in a relatively small number of holdings or sectors.

For more guidance on ETF investing, check out the full guide at this link.