Real estate skeptics can now double as Horizons introduces leveraged sector ETFs

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An ETF pair will give investors the opportunity to place bets for or against the sector

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A new ETF product gives investors the chance to double their negative bets on the Canadian real estate sector, which has defied its skeptics for years.

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Horizons ETFs Management (Canada) Inc. this week launched a pair of leveraged ETFs that track the Solactive Equal Weight Canada REIT Index and give investors the flexibility to place bets for or against the sector.

The BetaPro Equal Weight Canadian REIT 2x Daily Bull ETF (HREU: TSX) is designed to provide twice (or 200 percent) the daily return of the REIT sector, while the BetaPro Equal Weight Canadian REIT -2x Daily Bear ETF (HRED : TSX) is the opposite, aiming for double the inverse of the daily performance of the REIT Index. Both ETFs have a management fee of 1.15 percent.

“There has been a lot of investor money in the space and it just creates more opportunities for individual investors who are trying to strengthen their own portfolios,” said Steve Hawkins, president and CEO of Horizons ETFs, at the Financial Post. “These products just give them more options.”

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Hawkins added that ETFs provide an easier way for investors to trade their real estate thesis without the risk or high costs of trading on margin, borrowing to invest or selling the asset directly.

Ahead of the product launch on Thursday, Horizons ETFs had received an influx of inquiries from clients looking for BetaPro ETFs or margin ETFs in real estate, especially as the country emerges from the pandemic. The REIT space has been an area of ​​interest for many investors, Hawkins said, and traders may soon look to take strong positions as the country emerges from a pandemic.

“Now (businesses) are starting to reopen and come back online and a lot of these properties and trusts ended up getting grants,” Hawkins said. “These grants are also starting to dry up in terms of government funding and support. So there is, I would say, a double-edged sword.

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Demand for office and retail space declined during the pandemic as Canadians worked from home and businesses were forced to close due to restrictions. The number of vacant downtown offices in Canada rose to 15.3% in the second quarter of 2021, from about 10.3% in the first quarter of 2020 before the pandemic hit.

The Solactive Equal Weight Canada REIT Index focuses on 22 companies in the commercial real estate sectors with a focus on residential apartment complexes, offices, retail and industrial real estate spaces. The index holds names like Dream Office Real Estate, Chartwell Retirement Residences, Riocan Real Estate Investment Trust and SmartCentres, among others. The index is up about 45 percent year over year.

The index has very limited exposure to single-family homes, which saw a sharp rise in prices during the pandemic as Canadians looked to buy homes in larger spaces.

Financial post

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In-depth reporting on The Logic’s innovation economy, presented in partnership with the Financial Post.

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