Invesco KBW Premium Yield Eq REIT ETF earns a Morningstar Medalist Rating of Negative with strength in areas such as People offset by weaker spots such as Process. The portfolio maintains a sizable cost advantage over competitors, priced within the cheapest fee quintile among peers.  

 The strategy earns a Low Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant overweight position in liquidity exposure and an underweight in quality exposure compared with category peers. High liquidity exposure is attributed to stocks with a high trading volume, lending managers more flexibility. And a low quality exposure is rooted in stocks with higher financial leverage and lower profitability. The strategy’s management team earns an Above Average People Pillar rating. The strategy's parent organization earns the firm an Average Parent Pillar rating. People Pillar and Parent Pillar ratings for this strategy are indirectly assigned by a Morningstar analyst rather than algorithmically derived. Please see the notes following each pillar section for more details. The details of assigning methods can be found in each pillar section.

Analyst Rating

Global Net Lease

Service Properties Trust

Gladstone Commercial

Uniti Group

Healthcare Realty Trust Inc

Easterly Government Properties

OUTFRONT Media

Global Medical REIT

Sabra Health Care

Omega Healthcare Investors

Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category benchmark on a risk-adjusted basis over the long term. Invesco KBW Premium Yield Eq REIT ETF earns a Low Process Pillar rating. 

The main driver of the rating is the fund's weak long-term risk-adjusted performance. This can be seen in its five-year alpha calculated relative to the category index, which suggests that the process has struggled over that period. The parent firm's five-year retention rate of 67% also weakens the process. The parent firm's disappointing risk-adjusted performance, as shown by its average 10-year Morningstar Rating of 2.8 stars, detracts from the rating as well. A lower star rating suggests that the firm has struggled to outperform on a risk-adjusted basis.

 This strategy skews toward smaller, deeper value companies compared with its average peer in the Real Estate Morningstar Category. Examining additional factor exposure, this strategy has consistently tilted toward companies with relatively higher trading volumes in the last few years. This gives the managers more flexibility during bear markets to sell without adversely affecting prices. In recent months, the strategy was more exposed to the Liquidity factor compared with its Morningstar Category peers as well. The strategy has also had a defensive tilt, demonstrated by lower exposure to the quality factor than peers in recent years. This means the fund has avoided holding companies that are consistently profitable, growing, and have solid balance sheets. Lacking this ballast, the fund's prospects could rest on its ability to surpass peers during economic booms. Similarly, in recent months, the strategy also had less exposure to the Quality factor than peers. Additionally, this strategy's portfolio has held more stocks with high dividend or buyback yields than peers over recent years. High-yield stocks tend to be associated with more mature, profitable businesses that can grow as well as provide a stream of income. Such stocks could suffer, however, if setbacks force them to cut their dividends. In this month, the strategy also had more exposure to the Yield factor over its peers. More information on a fund and its respective category's factor exposure can be found in the Factor Profile module within the Portfolio section. 

 The portfolio is overweight in real estate by 2.6 percentage points in terms of assets compared with the category average, and its healthcare allocation is similar to the category. The sectors with low exposure compared to category peers are consumer cyclical and financial services; however, the allocations are similar to the category. The strategy owns 31 securities and is diversified among those holdings. In its most recent portfolio, 45.5% of the strategy's assets were concentrated in the top 10 fund holdings, as opposed to the category average's 59.9%. And finally, in terms of portfolio turnover, looking at year-over-year movements, 73% of the fund's holdings have turned over, whether through increasing, decreasing, or changing a position.

Process

Invesco KBW Premium Yield Eq REIT ETF benefits considerably from its equity team, earning it an Above Average People Pillar rating. There are four managers listed on the fund: Michael Jeanette, Peter Hubbard, Tony Seisser, Pratik Doshi. The team is well equipped, with an average of 12 years of portfolio management experience. Together, they manage a total of 144 strategies, with a Bronze asset-weighted average Morningstar Medalist Rating, indicating the potential to deliver positive alpha relative to the category median in aggregate. This group has been working together for a while and has been successful in retaining talent compared to peers, with no departures in the last five years.  

 Note: This People Pillar rating is indirectly assigned by an analyst. Morningstar analysts evaluate the People Pillar for passive products at the brand level and may also differentiate by asset class. There is at least one other passive strategy at the firm that is covered by a Morningstar analyst, so the People Pillar rating of the fund is inherited from the rating that the Morningstar analyst assigned to investment vehicles under the same brand name.

Above Average

People

Invesco succeeds in a number of areas but also has its share of subpar offerings, along with many others that land somewhere in the middle. A mid-2023 change of CEO, from longtime chief Marty Flanagan to veteran Invesco executive Andrew Schlossberg, is noteworthy, and several other executives retired or departed in 2023. Portfolio-manager shuffles aimed at bolstering poor performers, which began under Flanagan, have continued under Schlossberg, who told Morningstar his most important aim is bolstering “investment quality.” However, major changes of direction or approach are unlikely. The firm retains a Morningstar Parent rating of Average. 
Invesco’s international-equity teams in Texas and New York remain solid. However, the extensive U.S.-equity lineup needs improvement. Fixed-income offerings run the gamut: The multisector and short-term-bond areas are good, but corporate high-yield is less impressive. The firm’s exchange-traded fund lineup includes the popular Nasdaq-focused QQQ; passive strategies make up around 37% of Invesco’s assets under management. Invesco has not been averse to trying new types of strategies, and it was among the firms that immediately launched a spot bitcoin ETF after SEC approval in early 2024.
The picture outside the United States is mixed. Fund performance has been subpar in Asia, and while the picture has brightened in the United Kingdom and Europe, that region still can’t be considered a strength.

Average

Parent

Invesco KBW Premium Yield Equity REIT ETF

KBWY tracks a dividend-yield-weighted index of small- and mid-cap equity REITs.

Alexandria Real Estate Equities

JPMorgan BetaBuilders MSCI US REIT ETF

Principal Real Estate Active Opportunities ETF

Columbia Research Enhanced Real Estate ETF

CareTrust REIT

Dimensional US Real Estate ETF

Dimensional Global Real Estate ETF

iShares Environmentally Aware Real Estate ETF

Fidelity MSCI Real Estate ETF

First Trust S&P REIT Index Fund

Franklin Street Properties Corp.

Generation Income Properties

Goldman Sachs Future Real Estate And Infrastructure Equity ETF

Home Appreciation US REIT ETF

Hudson Pacific Properties

iShares Cohen & Steers REIT ETF

Pacer Benchmark Industrial Real Estate SCTR ETF

InvenTrust Properties Corp

iShares U.S. Real Estate ETF

JPMorgan Realty Income ETF

Janus Henderson U.S. Real Estate ETF

NETLease Corporate Real Estate ETF

Nuveen Short-Term REIT ETF

REITs bounced back from a rough start to the year with a strong +3.26% average total return in March. Mid cap (+5.04%), small cap (+3.90%) and large cap REITs (+2.32%) averaged gains in March, while micro caps (-0.32%) saw yet another month in the red. 78.06% of REIT securities had a positive total return in March.

The State Of REITs: April 2024 Edition

Invesco KBW Premium Yield Equity REIT ETF holds a portfolio of 30 equity REITs focused on higher yields. The 8% yield looks very attractive for income-oriented investors. Nonetheless, it has several shortcomings: high volatility, capital decay, distribution decay after 2016, and a bad rating of the largest holding.

KBWY: Wasting Capital In Risky REITs To Pay An 8% Yield

Broadstone Net Lease

Blackstone Group

CTO Realty Growth

Diversified Healthcare Trust

Direxion Daily Real Estate Bull 3x Shares

Direxion Daily Real Estate Bear 3x Shares

Ellington Residential Mortgage REIT

Empire State Realty Trust

Highwoods Properties

Independence Realty Trust

Nuveen Real Estate Income Fund

LTC Properties

Neuberger Berman Real Estate Securities Income Fund Inc

Realty Income Corp

US Diversified Real Estate ETF

Public Storage

Invesco Active US Real Estate

ALPS Active REIT ETF

Virtus Real Asset Income ETF

U.S. equity markets declined this week while benchmark interest rates jumped to the highest level since November after stronger-than-expected employment data showed robust hiring trends in early 2024. Stagflation has crept back into the economic discussion over the past several weeks amid a resurgence in oil prices alongside economic data showing stubbornly lukewarm inflationary trends. Following two straight weeks of gains which had lifted the benchmark to record-highs, the S&P 500 declined by 0.9% this week. Real estate equities were among the laggards this week.

A Crude Problem

American Tower

Equinix

Essex Property Trust

H&R Block

ProShares Short Real Estate

Cohen And Steers Total Return Realty Fund

Cohen & Steers Reit And Preferred Income Fund Inc

Cohen & Steers Quality Income Realty Fund

SPDR Dow Jones REIT ETF

Real estate investment through REITs is popular because REITs distribute generous dividends and also they're easy to understand.

Investing In Real Estate Through REITs

Healthpeak Properties Inc

Ellington Financial

Extra Space Storage

Kimco Realty

Gladstone Land

Ready Capital Corp

Regency Centers

Two years of persistent rate-driven pressure on commercial and residential real estate markets appeared to be easing in early 2024, but firming inflation has again muddied the outlook. Expectations of "Higher for Longer" have merely shifted to "High for Long." Many private equity funds and some highly-levered REITs were ill-prepared for a period of sustained 4-5%+ benchmark rates. Private markets are finally feeling the pain that beset public REIT investors since 2021. Commercial property values have now declined over 20% nationally, and nearly 40% in some troubled segments.

State Of REIT Nation: Not Out Of The Woods, Yet

American Homes 4 Rent

Brandywine Realty

Chatham Lodging Trust

EPR Properties

Iron Mountain

Medical Properties Trust

REITs fell slightly deeper into the red in 2024 with a -0.81% total return in February. Mid cap (+1.46%) and large cap REITs (+1.04%) averaged gains in February outperforming small caps (-1.33%) and micro caps (-6.98%). Only 50.64% of REIT securities had a positive total return in February.

The State Of REITs: March 2024 Edition

Apple Hospitality REIT

Brixmor Property Group

Americold Realty

Digital Realty Trust

Equity LifeStyle Properties

First Industrial Realty Trust

Host Hotels & Resorts

Innovative Industrial Properties

Invitation Homes

Kite Realty Group

Lamar Advertising

Over 200 U.S. REITs and homebuilders have reported fourth-quarter earnings results over the past six weeks, providing critical information on the state of the commercial and residential real estate industry. Beneath the "Rates Up, REITs Down" headwinds, REITs delivered a surprisingly solid earnings season, and certainly better than the downbeat prevailing narrative of "CRE distress" would suggest. Consistent with the "Tale of Two Economies" trends that we've discussed, upside surprises this earnings season came largely from the service-oriented pro-cyclical property sectors - retail, hotel, and specialty REITs.

Winners Of REIT Earnings Season

Schwab U.S. REIT ETF

Seven Hills Realty Trust

ProShares UltraShort Real Estate

Pacer Funds Trust-Pacer Benchmark Data & Infrastructure Real Estate Sector ETF

How REITs have fared through high interest rate environment. Takeaways from REITs earnings season so far. When rate cuts do come, some REIT sectors may stand to benefit.

Why Lower Rates Could Lead To Opportunities In REITs This Year

Bank of America

Citigroup

CorEnergy Infrastructure Trust

Goldman Sachs

JPMorgan Chase & Co

Morgan Stanley

Office Properties Income Trust

The REIT sector had a rough start to 2024 with a -5.72% total return in January. Large cap REITs (-4.79%) outperformed their smaller peers in January. Micro cap REITs (-8.39%) averaged the steepest declines. Only 9.55% of REIT securities had a positive total return in January.

The State Of REITs: February 2024 Edition

Designed to provide broad exposure to the Real Estate ETFs category of the market, the Invesco KBW Premium Yield Equity REIT ETF (KBWY) is a smart beta exchange traded fund launched on 12/02/2010.

Is Invesco KBW Premium Yield Equity REIT ETF (KBWY) a Strong ETF Right Now?

ProShares Ultra Real Estate

iShares Core U.S. REIT ETF

Vanguard Real Estate ETF

The yield on 10-year Treasury Inflation-Protected Securities TIPS fell significantly from ~2.5% to ~1.7% in the last two months of 2023. How does this affect real estate? As long-lived, fixed assets with inflation-protective characteristics, quality real estate can be viewed as an equivalent to TIPS plus a risk premium.

An Opportunity For REITs To Shine In 2024

AGNC Investment

Boston Properties

Crown Castle International

iShares CMBS ETF

Dynex Capital

Jones Lang LaSalle

iShares MBS ETF

Orchid Island Capital

U.S. equity markets notched another week of gains after a busy slate of economic data and corporate earnings results were broadly consistent with a "soft landing" trend for the domestic economy. Ahead of the Federal Reserve's first policy meeting of 2024, the FOMC's favored inflation gauge - Core PCE - showed a "2-handle" for the first time in nearly two years. Notching a series of record highs through the week, the S&P 500 advanced 1.2%, extending its impressive rally since late October to 12 of the past 13 weeks.

Fed Looms As Earnings Begin

After lagging equities for the past two years, REITs offer an attractive investment opportunity in 2024. Peaking or falling yields have historically been a catalyst for strong REIT market outperformance.

2024 Listed REITs Outlook

Prologis

Real estate earnings season kicked into gear this week, and over the next month, we'll hear results from 175 equity REITs, 40 mortgage REITs, and dozens of housing industry companies. The sector with perhaps the most to gain from moderating inflation and a normalization in Fed monetary policy, REITs enter earnings season with upside momentum after a dismal eighteen-month stretch. Sentiment and macroeconomic conditions have improved significantly in the past quarter, fueled by several months of encouraging inflation data pointing once again towards a "soft landing" for the domestic economy.

REIT Earnings Preview: Animal Spirits Revived?

KBWY is a high-yield REIT index ETF. It offers investors a strong 8.6% yield, and could outperform as interest rates go down. It is also an incredibly risky, volatile investment.

KBWY: High-Yield REIT Index ETF, Strong 8.6% Yield, Excessively Risky Holdings

D.R. Horton

Hannon Armstrong Sustainable Infrastructure Capital

M.D.C. Holdings

MFA Financial

Pebblebrook Hotel Trust

U.S. equity markets posted another week of gains as investors weighed conflicting indications on economic momentum and the need for rate cuts, with strong economic data offsetting soft corporate earnings. Swaps markets are now pricing in roughly 45% probability that the Federal Reserve will begin its rate-cutting cycle in March, down from odds of over 80% in the prior week.

Rate Cut Rethink

AGNC Investment Corp. Deposit Shs Repr 1/1000th Cum Conv Red Pfd Registered Shs Series C

Blackstone Mortgage Trust

Chimera Investment

Capital Southwest

Gladstone Investment

Granite Point Mortgage Trust

Invesco Mortgage Capital

Main Street Capital

Annaly Capital

New York Mortgage Trust

PennyMac Mortgage Investment

Rithm Capital Corp

Sixth Street Specialty Lending

Two Harbors Investment

Big dividend yields? Yes. But that's not enough. One of the ETFs we love smashing seems to be struggling. Maybe buying yield blindly isn't a great technique. When you're investing, you need to start looking at relative values.

Big Yields Meet Big Trouble

CubeSmart

National Storage Affiliates Trust

Global Self Storage

Self-Storage REITs delivered incredible growth early in the pandemic driven by surging housing market activity, but have been victims to their own success of late amid a supply-driven cooldown. Robust double-digit rent growth and relatively low operational barriers to entry prompted a wave of new development, with a roughly 12% expansion in total supply expected between 2022 and 2024. This supply boom - twice the magnitude of the multifamily sector - has reignited fierce "storage wars" between competing facilities, which has led to double-digit dips in new lease rates since mid-2022.

Storage REITs: Victims Of Own Success

Pennsylvania Real Estate Investment Trust

The REIT sector closed the year out strong with a +11.40% total return in December, pushing into positive territory for the full year (+8.66%). Small cap REITs (+13.39%) outperformed in December. Large cap REITs (+9.55%) averaged a lower return than their smaller peers. 90.79% of REIT securities had a positive total return in December with 66.25% in the black for the full year.

The State Of REITs: January 2024 Edition

Apartment Income REIT Corp

AvalonBay Communities

Clipper Realty

Camden Property

Centerspace REIT

Elme Communities

Equity Residential

Mid-America Apartment Communities

NexPoint Residential Trust

Apartment REITs were among the weakest-performing property sectors for a second-straight year in 2023 - lagging even the battered office sector - despite delivering another year of mid-single-digit earnings growth. Following two years of record-setting rent growth, residential rents decelerated in 2023 alongside a broader cooling of inflationary pressures, with multifamily rents seeing a particularly sharp cooldown amid supply headwinds. The wave of pandemic-era development - started at a time when rents were rising double-digits - resulted in a record year of new deliveries in 2023 with similarly elevated supply levels.

Apartment REITs: A Renter's Market

Going into the monetary tightening cycle, KBWY had an unfavorable risk and reward profile due to its bias toward small-cap REITs and exposure to potential value traps. KBWY has performed poorly and has not recovered from losses in early 2020, but has done well compared to the overall REIT market recently. The future outlook of KBWY has improved due to more accommodative monetary policy conditions and major dividend cuts but is dependent on the path of SOFR in 2024.

KBWY: Revisiting This Risky REIT ETF After Rates Have Peaked

Arlington Asset Investment

Arbor Realty Trust

ACRES Commercial Realty Corp.

Builders FirstSource

COPT Defense Properties

U.S. equity markets notched a fifth-straight week of gains as benchmark interest rates continued a decisive retreat after economic data and comments from Fed officials fueled bets on a pending pivot. Advancing for a fifth-straight week since dipping into "correction territory" at the end of October, the S&P 500 gained another 0.8% on the week, while Mid-Caps and Small-Caps gained 2%. Lifted by the rate retreat, real estate equities were again the leaders this week. The Equity REIT Index rallied 5.0% this week, extending their rebound since late-October to nearly 20%.

Pivot Pending

News for Invesco KBW Premium Yield Equity REIT ETF ETF (KBWY)