Vanguard Looking to Expand Index Funds’ Exposure to REITs

Investment firm Vanguard, the largest REIT investor in the world, is seeking shareholder approval to change the benchmark for its REIT index funds. The funds would invest in a broader range of REITs and listed real estate companies as a result.

In a July 13 filing with the U.S. Securities and Exchange Commission (SEC), Vanguard proposed to its shareholders that the firm’s REIT index funds adopt a modified MSCI REIT index. Doing so would align Vanguard’s REIT index funds with its 10 other sector funds as well as the Global Industry Classification Standard (GICS). In 2016, S&P Dow Jones Indices and MSCI moved stock-exchange listed Equity REITs and other listed real estate companies from the Financials sector of GICS to a new Real Estate sector.

To bring Vanguard’s REIT funds in line with the change to GICS, the firm is proposing to benchmark them to the MSCI US Investable Market Real Estate 25/50 Index. That index includes real estate management and development companies in addition to REITs and accommodates greater investment while satisfying current Internal Revenue Code requirements for regulated investment companies. Consequently, the funds would have broader exposure to the real estate market, although more than 95 percent of the funds’ assets will continue to be invested in listed REITs.

(Contact: Mike Grupe at mgrupe@nareit.com)

The Nareit Developments section on reit.com provides updates of Nareit's activities and key events impacting the REIT and commercial real estate industry. Nareit is the worldwide representative voice for REITs and publicly traded real estate companies with an interest in U.S. real estate and capital markets. Please see our Terms of Use.