XRE vs ZRE vs XIC – Top 3 Canadian Index ETFs Review & Comparison

In this article, I will be reviewing and comparing three Canadian Real Estate Investment Trust (REIT’s) ETF’s – XRE, ZRE and XIC. All three ETFs reviewed here are the best in class and segment. Let’s get started. 

The XRE, ZRE & XIC are all Canadian REIT index ETFs, however, they each differ somewhat in how they hold the index.

XRE tracks the S&P/TSX Capped REIT Index, a modified cap-weighted index while VRE tracks the FTSE Canada All Cap Real Estate Index Capped 25% Index, a cap-weighted index which prevents individual holdings from exceeding 25%. 

ZRE differs the most in that it tracks an equal-weighted index of Canadian REITs where each holding is held in equal amount.

When it comes to XIC, it tracks the Toronto Stock Exchange, which represents the Canadian equity markets, which includes small, medium and large business throughout all sectors.The XIC caps exposure to any one security at 10%, therefore reducing concentration risk.

All three ETF’s are good performers in today’s market and have performed great over the years.

Let’s get started by reviewing and comparing all the three, one by one. 

1. XRE – iShares S&P/TSX Capped REIT Index Fund

XRE seeks to provide long-term capital growth by replicating, to the extent possible, the performance of the S&P/TSX Capped REIT Index.

Under normal market conditions, the fund will primarily invest in equity securities issued by Canadian small-capitalization issuers and Canadian real estate investment trust issuers. 

1. Exposure to Canadian Real Estate Income Trusts (REITs)

2. Exposure to different types of REITs in a single fund, such as the retail, residential, office and industrial

3. Receive monthly distributions

XRE seeks to provide long-term capital growth by replicating the performance of the S&P/TSX Capped REIT Index, net of expenses.

What does the XRE ETF Invest in?

Under normal market conditions, the fund will primarily invest in equity securities issued by Canadian small-capitalization issuers and Canadian real estate investment trust issuers.

The Index is comprised of constituents of the S&P/TSX Composite Index with GICS Industry code 404020. The charts below give you a snapshot of the ETF’s investments on January 31, 2018. The ETF’s investments will change.

XRE – Key Facts

  • Net AssetsCAD 1,314,799,049

  • Inception Date – Oct 17, 2002

  • ExchangeToronto Stock Exchange

  • Asset Class – Real Estate

  • Benchmark IndexS&P/TSX Capped REIT Index

  • Index ProviderStandard & Poors

  • Fiscal Year End – Dec 31, 2014

  • Rebalance Frequency – Quarterly

  • Units Outstanding – 2019 70,700,000

  • Number of Holdings –16

  • Price –18.60

  • Options AvailableNo

XRE – Top 10 Investment Holdings

XRE Brokerage Commissions:

You may have to pay a commission every time you buy and sell units of the ETF. Commissions may vary by brokerage firm. Some brokerage firms may offer commission-free ETFs or require a minimum purchase amount.

XRE ETF Expenses

You don’t pay these expenses directly. They affect you because they reduce the ETF’s returns. As of January 31, 2018, the ETF’s expenses were 0.62% of its value. This equals $6.20 for every $1,000 invested.

ETF’s & Tax – The Relation

In general, you’ll have to pay income tax on any money you make on an ETF. How much you pay depends on the tax laws where you live and whether or not you hold the ETF in a registered plan, such as a Registered Retirement Savings Plan or a Tax-Free Savings Account.

Keep in mind that if you hold your ETF in a non-registered account, distributions from the ETF are included in your taxable income, whether you get them in cash or have them reinvested.

xic

2. ZRE – BMO Equal Weight REITs Index Fund

The BMO Equal Weight REITs Index ETF has been designed to replicate, to the extent possible, the performance of the Solactive Equal Weight Canada REIT Index, net of expenses.

The Fund invests in Canadian real estate investment trusts. The Fund invests in and holds the Constituent Securities of the Index in the same proportion as they are reflected in the Index.

Market Performance Of ZRE 

The ETF outperformed the broad-based S&P/TSX Capped Composite Index by 6.02%. However, the more appropriate comparison is to the Solactive Equal Weight Canada REIT Index (the “Index”), due to the concentration of the portfolio in Canadian real estate investment trusts (“REITs”).

ZRE Fund returned 6.76% versus the Index return of 7.07%. The change in total net asset value during the Period from approximately $404 million to approximately $474 million had no impact to the performance of the ETF.

The difference in the performance of the ETF relative to the Index during the Period (-0.31%) resulted from the payment of management fees (-0.31%).

ZRE – Recent Developments

The portfolio manager believes that growth in the Canadian economy will continue to strengthen for the remainder of 2019. Stronger global economic growth should help Canadian exports, however, uncertainty in both the housing market and oil prices may present risks to equity growth.

There is some concern in the sector as the Bank of Canada is expected to continue to raise interest rates, which may be a negative for REITs.

However, any interest rate increase will likely be supported by economic strength, and it is expected that tightening credit conditions will be supportive of REIT stocks.

Performance Details of ZRE ETF

Fund Total Assets ($Mn)

$ 580.77

Market Price

$ 23.02

12-Month Low/High (Market Price)

$ 20.26 / $ 23.25

Price (NAV)

$ 23.0310

12-Month Low/High (Price (NAV))

$ 20.2336 / $ 23.2488

Distribution Frequency

Monthly

ZRE Annualized Returns:

 1 Year2 Year3 Year5 Year10 YearSince Inception
NAV16.82%12.93%14.53%9.13%10.62%
Index17.74%13.71%15.40%9.91%11.33%

Top Holdings of ZRE: 

Weight (%)

Name

6.16%

INTERRENT REAL ESTATE INVESTMENT TRUST

5.68%

GRANITE REAL ESTATE INVESTMENT TRUST

5.65%

KILLAM APARTMENT REAL ESTATE INVESTMENT TRUST

5.62%

DREAM INDUSTRIAL REAL ESTATE INVESTMENT TRUST

5.61%

H&R REAL ESTATE INVESTMENT TRUST

5.55%

SMARTCENTRES REAL ESTATE INVESTMENT TRUST

5.53%

NORTHVIEW APARTMENT REAL ESTATE INVESTMENT TRUST

5.50%

ALLIED PROPERTIES REAL ESTATE INVESTMENT TRUST

5.42%

CHOICE PROPERTIES REAL ESTATE INVESTMENT TRUST

5.35%

CROMBIE REAL ESTATE INVESTMENT TRUST

3. XIC – ISHARES CORE SP TSX CAPD COM INX Fund

First of all, XIC holds 250+ Canadian equities representing 95% of the Canadian equity market.. Compare that to the 60 held by XIU.

With XIC, you are going to see more diversity because you have access to more companies with XIC. Secondly, XIC limits the the weighting in its ETF to 10% of the total holdings.

This means that, the top 10 holdings in XIC account for only 33% of the total portfolio, while in XIU, the top 10 holdings make up 46% of the portfolio.

1. Own the entire Canadian stock market

2. Low cost

3. Designed to be a long-term core holding

Seeks long-term capital growth by replicating the performance of the S&P®/TSX® Capped Composite Index, net of expenses.

Important information regarding a unit split affecting this fund can be found by clicking here.

XIC: Management Fees

Management Fee 0.55%
Management Expense Ratio (MER) 0.61

XIC: ETF’s Portfolio Top 10 Holdings

XIC: Exposure Breakdown Sector Wise

xic

Conclusion 

ETF’s are always great tools for investment. Especially the index funds. 

All the three funds listed above are great – 2 of the ETF’s XRE and XIC are from BlackRock iShares and ZRE is from BMO. 

I personally believe in all three ETF’s listed here. All three of them have performed great over the years and should perform well for the coming years too looking at the investments and the portfolio.

Also, do remember that that these are REIT specific ETF’s and one of the market’s best for any portfolio type – especially for your TFSA’s and RRSP’s. 

Finally the decision is yours, invest wisely and make the best returns of your money vested. 

Please leave your thoughts and comments below.  

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One thought on “XRE vs ZRE vs XIC – Top 3 Canadian Index ETFs Review & Comparison

  • March 25, 2019 at 12:57 pm
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    Excellent review, thanks!

    Reply

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