A Bronze-Rated Fund for Exposure to Foreign Real Estate Stocks
Investors may be missing out on half the global real estate market.
The prospective benefits of global diversification apply to virtually all corners of your portfolio, including real estate securities. At the end of November 2019, publicly traded U.S. real estate securities made up just shy of 50% of the total market capitalization of the global opportunity set in this market segment--as proxied by the FTSE EPRA Nareit Global Index. Investors without any ex-U.S. real estate exposure are missing out on half the market.
Vanguard Global ex-U.S. Real Estate (VNQI) is a sound choice for broadly diversified, low-cost exposure to foreign real estate securities. This fund tracks a market-cap-weighted index that is representative of the opportunity set available to investors in this market segment. It also has a durable edge over peers in the form of its lowest-in-class expense ratio. That said, the fact that its benchmark omits U.S. securities and includes emerging-markets ones makes it a misfit in a Morningstar Category dominated by more globally oriented peers. Also, its emerging-markets exposure has translated to significantly higher risk than most funds in the category. It earns a Morningstar Analyst Rating of Bronze.
Ben Johnson does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.