Invesco PowerShares plans to launch the first actively managed U.S. real estate ETF this week.
The PowerShares Active U.S. Real Estate Fund, which will begin trading on the New York Stock Exchange under the ticker PSR, will invest in real estate securities included in the FTSE NAREIT Equity REITs Index.
The Equity REITs Index has fallen 41.2% this year, more than the S&P 500's 37.6% decline. PowerShares views this drop as an opportune entry point, but the firm will need to persuade investors that this is the bottom.
"The biggest challenge is certainly the current market environment, which has so many investors fearful and sitting on the sidelines," said Ed McRedmond, senior vice president of portfolio strategies for Invesco PowerShares.The new fund will be managed by Invesco Institutional, which has managed real estate securities since 1988. The team comprises 13 investment professionals who had about $8 billion in assets under management as of Sept. 30. McRedmond said PSR's lead manager, Joe Rodriguez, and his team "are arguably among the top REIT investment managers in the country." PSR will have to outperform the iShares Dow Jones U.S. Real Estate Fund (IYR) and the SPDR Dow Jones Wilshire REIT ETF (RWR). IYR and RWR are passively managed ETFs, whose top holdings include Simon Property (SPG), SL Green Realty (SLG), Vornado Realty Trust (VNO), ProLogis Trust (PLD) and Boston Properties (BXP). The funds have been thrown for 42.2% and 40.76% losses so far this year. A commercial focus PSR initially will take a more focused approach. "The objective is to create value above that of a passive index," said Rodriguez. "At the onset, we expect to hold between 45 and 55 positions."