A housing ETF built with renters in mind
Hoya Capital Real Estate: Most Successful & Innovative ETF Launch – Alex Pettee (pictured), President and Director of Research & ETFs for Hoya Capital Real Estate, explains that the Hoya Capital Housing 100, the underlying index for the newly-launched HOMZ ETF, is designed to be the new benchmark for the performance of the entire US housing industry.
Designed to track the 100 companies that collectively represent the performance of the US Housing Industry, the index includes sectors that are not typically combined in conventional homebuilder or real estate funds including home builders, rental operators, home improvement companies, and real estate financing, services, and technology firms.
Hoya Capital, winner of the Most Successful & Innovative ETF launch in the 2019 ETF Express US awards, has undertaken research that shows that the average American spends 33 per cent of their income on housing, yet real estate represents less than 5 per cent of a typical S&P 500 index fund.
“There is a huge mismatch between the asset size and the liability size of an investor’s balance sheet,” Pettee says. “HOMZ was created to reflect the investor driven asset allocation model, designed to address the most pressing investment need affecting millions of Americans – especially renters – which is the need for upside exposure to residential real estate.”
Pettee believes that renters are significantly under allocated to residential real estate and exposed to the negative effects of rising housing costs and rents. He believes that advisers often overlook what he views as the most critical question in an asset allocation and risk tolerance questionnaire: “Are you an owner or renter?”
“The optimal asset allocation is vastly different for renters.” Pettee says. “We see tremendous potential for the use of HOMZ as part of a model driven asset allocation, which we view as the next stage of growth for the asset management industry. It’s becoming an era of ‘mass customisation’ and we believe that HOMZ is perfectly suited for these allocation models.”
Hoya Capital was born as a research focused investment advisory, aiming to make real estate more accessible to all investors. “The fact that we deal with individual clients on a daily basis gives us a unique perspective on the needs and objectives of the individual investors,” Pettee says.
Since its launch in March 2019 through to end September 2019, HOMZ has returned 14.91 per cent, compared with the S&P 500 return of 6.19 per cent based on market value. “Performance has been strong, reflecting the re-acceleration of the US housing market this year. We saw 12-year highs in the monthly rate of new homes sales this summer but despite this, we are still at historically low levels of total housing supply.”
The effects of the under-investment in new home construction is compounded by the demographic-driven tailwinds that Pettee expects to drive housing demand over the next decade and beyond.
“The millennial generation, the largest age cohort in American history, is coming full-steam into the housing market over the next decade, whether the supply side is ready for it or not.”
Alex Pettee, CFA
President, Director of Research & ETFs,
Hoya Capital Real Estate
Alex Pettee, CFA, founded Hoya Capital Real Estate, an SEC-Registered Investment Advisor based in Connecticut that is working to make real estate investing more accessible for all investors. A dual-degree holder and two-sport athlete at Georgetown University, Alex is President and Director of Research & ETFs for Hoya Capital Real Estate and is a CFA Charterholder. Hoya Capital is the advisor to the Hoya Capital Housing ETF, trading on the NYSE under ticker symbol HOMZ.