Real Estate ETFs: How Do Vanguard Real Estate ETF and Xtrackers International Real Estate ETF Compare?

Vanguard Real Estate ETF (NYSEMKT:VNQ) offers a liquid entry into domestic real estate investment trusts, while Xtrackers International Real Estate ETF (NYSEMKT:HAUZ) provides low-cost exposure to property markets outside the United States.

Investors often use real estate to diversify portfolios beyond traditional stocks and bonds, seeking potential income and capital appreciation. While both funds target property owners and managers, they operate in entirely different geographical spheres. This comparison looks at how their costs, regional focuses, and historical volatility profiles differ for those seeking exposure to income-producing assets.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500; beta is calculated from monthly returns over the available fund history (up to five years). The 1-yr return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.

The Xtrackers fund is the more affordable option with a 0.10% expense ratio, though the 0.13% fee for the Vanguard fund remains highly competitive for the real estate category. While a 0.03% difference may seem negligible, it could impact total returns over long investment horizons as costs compound. Trailing dividend yields are nearly identical at 3.6% and 3.5%, respectively.

Performance & risk comparison

What's inside

Vanguard Real Estate ETF (VNQ) holds 158 positions, primarily focused on U.S. property markets. Its largest positions include Welltower (NYSE:WELL) at 9.80%, Prologis (NYSE:PLD) at 7.82%, and Equinix (NASDAQ:EQIX) at 6.37%. Launched in 2004. The portfolio includes approximately 97% real estate and 1% basic materials. Vanguard Real Estate ETF has paid $3.47 per share over the trailing 12 months, which, at its recent ~$99.48 share price, yields 3.5%.

Xtrackers International Real Estate ETF (HAUZ) tracks 417 holdings across developed and emerging markets excluding the U.S. Its top holdings include Goodman Group (ASX:GMG) at 4.28%, Mitsubishi Estate (FRA:MES) at 3.16%, and Mitsui Fudosan (FRA:MFU) at 2.64%. Launched in 2013. The portfolio is roughly 96% real estate and 1% industrials. Xtrackers International Real Estate ETF has paid $0.82 per share over the trailing 12 months, which, at its recent ~$22.88 share price, yields 3.6%.

For more guidance on ETF investing, check out the full guide at this link.

Which looks like the better buy

The Vanguard Real Estate ETF (VNQ) and the Xtrackers International Real Estate ETF (HAUZ) are both real estate exchange-traded funds (ETFs). However, they differ in many key respects. For investors seeking exposure to the real estate market, both funds are worth considering, but let’s take a closer look at what each fund offers.

First, there’s VNQ. This fund is, by far, the world’s largest real estate ETF, and one of the world’s largest ETFs overall, with over $39 billion in AUM. What makes it so popular with investors? For starters, the fund has been around for over 20 years, having been founded in 2004. Second, the fund’s affordable expense ratio of 0.13% makes it appealing to cost-conscious investors. Next, its focus on American REITs makes it a compelling choice for those seeking straightforward exposure to real estate with steady income. Finally, there’s the fund’s performance. VNQ has delivered a total return of 62% over the last 10 years, with a compound annual growth rate (CAGR) of 5.0%.

Then, there’s HAUZ. This fund differs from VNQ in several ways. To start, HAUZ is focused on the international real estate market. Its holdings are truly global, spread across Asia Pacific (59%), Europe (30%), and the Americas (10%). In addition, HAUZ is a much smaller fund, with around $1 billion in AUM. Turning to performance, HAUZ has recorded a total return of 39% over the last 10 years, equating to a CAGR of 3.4%. Finally, HAUZ does boast a lower expense ratio of 0.10%.

In summary, the choice between these two funds largely comes down to investment strategy. Those seeking international exposure — which is less correlated with the U.S. stock market — will likely favor HAUZ. Those who prefer investing in U.S.-based companies will likely favor VNQ.

Jake Lerch has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Equinix, Goodman Group, Prologis, and Vanguard Real Estate ETF. The Motley Fool has a disclosure policy.