Real estate doubters can now double down as Horizons’ introduces leveraged sector ETFs

a sign on the side of a building: The demand for office and retail space has waned during the pandemic. © Provided by Financial Post The demand for office and retail space has waned during the pandemic.

A new ETF product is giving investors the chance to double down on their negative bets on Canada’s real estate sector, which has defied its doubters for years.

Horizons ETFs Management (Canada) Inc. this week launched a pair of leveraged ETFs that track the Solactive Equal Weight Canada REIT Index, and give investors the chance to place bets either for or against the sector.

The BetaPro Equal Weight Canadian REIT 2x Daily Bull ETF (HREU:TSX) is designed to provide two times (or 200 per cent) the daily performance of the REIT sector, while the BetaPro Equal Weight Canadian REIT -2x Daily Bear ETF (HRED:TSX) is the opposite, targeting double the inverse of the REIT index’s daily performance. Both ETFs have a 1.15 per cent management fee.

“There’s been a lot of investor money coming into the space and that just creates more opportunity for individual investors who are trying to empower their own portfolios,” Steve Hawkins, president and chief executive officer of Horizons ETFs, told the Financial Post. “These products just give them more options.”

Hawkins added that the ETFs present an easier way for investors to trade on their real estate thesis without taking on the risk or high costs of trading on margin, borrowing to invest, or shorting the asset directly.

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Prior to launching the product on Thursday, Horizons ETFs had been receiving an influx of inquiries from customers looking for BetaPro ETFs or margin ETFs in the real estate space, especially as the country emerges from the pandemic. The REIT space has been a sector of interest for many investors, Hawkins said, and traders could soon be looking to take firm positions as the country emerges from a pandemic.

“Now (businesses are) starting to re-open and come back online and a lot of those properties and these trusts ended up getting subsidies,” Hawkins said. “Those subsidies are starting to dry up now as well from a government funding and support perspective. So there’s, I would say, a double-edged sword.”

The demand for office and retail space has been waning during the pandemic as Canadians worked from home and businesses were forced to shut down amid restrictions. Canada’s downtown office vacancies climbed to 15.3 per cent in 2021’s second quarter from around 10.3 per cent in the first quarter of 2020 before the pandemic struck.

The Solactive Equal Weight Canada REIT Index focuses on 22 companies in the commercial real estate sectors focusing on residential apartment complexes, office, retail, and industrial real estate space. The index holds names like Dream Office Real Estate, Chartwell Retirement Residences, Riocan Real Estate Investment Trust and SmartCentres, among others. The index is up about 45 per cent year-over-year.

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The index has a very limited exposure to single-family homes, which have seen a stark run-up in prices during the pandemic as Canadians sought to buy homes in larger spaces.

Financial Post

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