New York-based asset manager
Van Eck Global
announced today that it has launched Market Vectors Mortgage REIT Income ETF (NYSE Arca: MORT), an exchange-traded fund (ETF) offering pure play exposure to the mortgage REIT marketplace.
“Yields from mortgage REITs have been higher in recent years than those provided by equity REITs and a number of other income-oriented products,” said Jan van Eck, Principal at Van Eck Global. “We’re pleased to bring out MORT, an ETF which we think could be a valuable portfolio building tool for yield-focused investors in this low-yield environment.”
MORT is intended to track, before fees and expenses, the performance of the Market Vectors Global Mortgage REITs Index (ticker: MVMORTTR), a capitalization-weighted index that requires constituent companies to derive at least 50 percent of their revenues from mortgage REITs. This includes companies and trusts which are primarily engaged in the purchase or service of commercial or residential mortgage loans or mortgage-related securities.
The Index had 25 constituents as of July 31, 2011, all of which were REITs focused on residential mortgages, commercial mortgages or a mix of both. Unlike other indexes used in mortgage REIT-focused ETFs, the Index does not include mortgage finance companies or savings associations.
Additionally, ongoing mortgage finance reform may present a compelling opportunity for mortgage REITs. If U.S. government continues to wind down its role in the mortgage market, private financing sources, such as mortgage REITs may play a more pivotal role in the industry.
Van Eck Global also notes that mortgage REITs are not without their risks, which can include credit risk, leverage risk and prepayment risk, among others. Mortgage REITs generate income by accessing short-term funding to invest in higher-yielding, long-term mortgage securities and thus are also subject to risks from rising interest rates, since when the spread between short-term and long-term interest rates decreases, the value of a mortgage REITs may decline.