ETF to capture the potential of the real estate sector and REITs in Europe

Europe has already begun a path back in terms of monetary policy, with the first cut by the ECB, reaching official rates at 4.25%. This first downward step will not be immediately followed by new cuts, but the reduction in the price of money by the European Central Bank will continue throughout 2025 and 2026. Periods of downward path in rates benefit companies in the real estate sector and Socimis through various means. The first is thanks to the moderation in the cost of financing, the cost of leverage for the companies themselves and, in addition, they will be favored by the lower cost of financing for those investors in real estate, that is, for their clients. Financing through mortgages will be cheaper so that will encourage demand in the real estate sector. Another way with a positive impact is through the higher valuation of the assets in the portfolio of real estate companies or SOCIMIs, thanks to more modest discount rates. Relaxation in monetary policy also favors greater economic dynamism and this, in turn, favors dynamism in consumption, which boosts the shopping center subsector, or real estate focused on retail. The macro therefore plays in favor of the real estate sector and SOCIMIs that maintain income indexed to inflation, so waiting for new cuts will not harm their businesses.

To position ourselves and take advantage of this tailwind in the real estate sector in Europe, today we analyze an exchange-traded fund, or ETF. The AMUNDI FTSE EPRA EUROPE REAL ESTATE UCITS ETF, with ISIN: LU1812091194 and Bloomberg code NEPRA, is an ETF or exchange-traded fund from the manager Amundi (BNP Paribas) based in Luxembourg, launched on November 18, 2022, listed in euros and with the fund’s currency also the euro. It is a passively managed ETF, indexed to the benchmark index: FTSE EPRA NAREIT Developed Europe Net Return, its Benchmark and the replication is carried out indirectly through swaps.

This ETF is trading at €31.17/share and has a NAV of €73.68 million, as of 06/07/24. It’s about a fund that complies with UCITS regulations, has a European passport, with SFDR Art.6 classification and distribution or distribution, so it pays dividends and does so once a year. The last payment was made on 12/12/23 and the amount paid to shareholders was €1.34/share.

The investment philosophy of the EPRA Europe Real State UCITS ETF is therefore to replicate as accurately as possible the evolution and profitability of the FTSE EPRA NAREIT Developed Europe index.in EUR, both up and down. This ETF offers exposure to the most liquid securities in the European real estate sector.

The fund is invested in 102 companies in the European real estate sector and the Top 10 in this positioning is as follows:

Diversified by geographies:

Currency diversification:

Regarding the level of riskon a scale with minimum risk 1 and maximum 7, this ETF has a level of 5:

Other data of interest, management fees 0.30%, moderate compared to other similar ETFs; It has no entry or exit commission and does not purchase a success commission.

Its historical profitability:

Other data and indicators of interest such as Tracking Error (2.13) show that this ETF replicates or indexes very closely to its reference index and that the volatility of the fund’s deviation from the benchmark is low; with Beta around 0.9, in line with its Correlation ratio and Square Ratio, so the ETF’s market exposure is in line with that of the benchmark. Sharpe and Sortino positively indicate that risk-adjusted profitability is adequate.

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