Real Estate Select Sector SPDR®’s Process Pillar rating is Average, but a strong management team still helps this strategy retain its Morningstar Medalist Rating of Bronze. The portfolio maintains a cost advantage over competitors, priced within the lowest fee quintile among peers.  

 The strategy’s management team earns an Above Average People Pillar rating. The strategy gets an Average Process Pillar rating.  Low quality exposure is attributed to stocks with higher financial leverage and lower profitability. And a low yield exposure is rooted in holding fewer stocks with high dividend or buyback yields -- instead, typically holding stocks in an early stage of development. The strategy's parent organization earns the firm an Above 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

Prologis

American Tower

Equinix

Welltower

Crown Castle International

Digital Realty Trust

Public Storage

Simon Property Group

Realty Income Corp

CoStar Group

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. Real Estate Select Sector SPDR® Fund earns an Average Process Pillar rating. The most important driver of the rating is that this fund tracks an index. Historical data, like Morningstar's Active/Passive Barometer, finds that passively managed funds have generally outperformed their active counterparts, especially over longer time horizons. Strong risk-adjusted performance also influences the rating. This can be seen in the fund's five-year alpha calculated relative to the category index, which suggests that the process was successful over that period. 

The investment strategy as stated in the fund's prospectus is:  The investment seeks to provide investment results that, before expenses, correspond generally to the price and yield performance of publicly traded equity securities of companies in the Real Estate Select Sector Index (the "index").  Under normal market conditions, the fund generally invests substantially all, but at least 95%, and of its total assets in the securities comprising the index. The index includes companies that have been identified as Real Estate companies by the Global Industry Classification Standard (GICS®). The fund is non-diversified. 

 The portfolio is overweight in real estate by 2.6 percentage points in terms of assets compared with the category average, and its consumer defensive 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 34 securities and is about as top-heavy as the category average, with 60.6% of assets in the top 10 holdings.

Average

Process

State Street’s team is strong compared with others in the industry, resulting in an Above Average People Pillar rating. There are two managers listed on the fund: Karl Schneider, Amy Cheng. Experience on the team is abundant, with 19 years of average portfolio management experience. Together, they manage a total of two strategies, with solid long-term prospects. The strategies average a Bronze asset-weighted Morningstar Medalist Rating, indicating a position to deliver positive alpha relative to the category median in aggregate.  

 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

State Street Global Advisors is under new leadership but continues to move along the positive trajectory established by former leaders. SSGA maintains its Above Average Parent Pillar rating.
Cyrus Taraporevala, who oversaw much of SSGA’s recent transformation, retired from the CEO position in December 2022 and passed the baton to his successor, Yie-Hsin Hung. She inherited a business that’s become more disciplined with its fund lineup. Fees have come down, while product development remains focused on fixed-income and sustainability funds, and many of SSGA’s launches have echoed that intention.
The seeds that SSGA planted over the past several years have been bearing fruit. It built out a low-cost series of portfolio building-block ETFs in the U.S. bearing the “SPDR Portfolio” branding. SSGA launched these later than its industry rivals, so they aren’t as large. But they’re competitive, with solid management and low fees, which helped them consistently take in new money over the past several years.
SSGA continued to overhaul its ETF business in Europe with most of its recent fixed-income and sustainability fund launches. Many of these funds track indexes and charge relatively low fees. With operations in the U.S. and Europe standing on a firm foundation, SSGA will put more focus on its Asia-Pacific business—the smallest regional segment of its business.

Parent

Real Estate Select Sector SPDR Fund

XLRE tracks a market-cap-weighted index of REITs and real estate stocks, excluding mortgage REITs, from the S&P 500.

The real estate investment trust sector is the best performer of the S&P 500's SPX, +0.11% 11 key sectors in morning trading Tuesday, as a drop in Treasury yields is helping the high-yielding sector attract buyers.

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The stock market’s advance/decline line completed is correction last week. It therefore gave a green light for stocks before the bullish news on the trade negotiations with China was released over the weekend.

The Week Ahead: Stock Market Flashes Green Light Before Trade News

The real estate investment trust and utilities sectors were the biggest losers of the S&P 500's 11 key sectors, and their weakness was unanimous, as a big jump in Treasury yields helped lure investors away from the high-yielding sector.

REIT, utilities sector trackers suffer unanimous declines as Treasury yields jump

ETFs tracking three of the S&P 500's  11 sectors are headed for record closes Friday, but before investors see that as a bullish sign they should note two are for sectors used as bond proxies and the other is a defensive sector.

ETFs tracking defensive REIT, utilities and consumer staples sectors rise toward record highs

Bullish chart patterns across the real estate sector suggest that this could be the group to watch over the weeks and months ahead.

Real Estate Stocks Poised to Move Higher

Traders are pricing in a rate cut as soon as July. The materials sector recovered, and the S&P 500 rebounded like it did in early March.

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SPDR S&P 500 ETF Trust

We favor technology and more cyclical industries, particularly in light of continued economic growth and the Fed putting rate hikes on hold.

News for Real Estate Select Sector SPDR Fund ETF (XLRE)