RWR vs. HAUZ: Which Real Estate ETF Is the Better Buy for Income Investors?

The State Street SPDR Dow Jones REIT ETF (NYSEMKT:RWR) and the Xtrackers International Real Estate ETF (NYSEMKT:HAUZ) both offer exposure to the real estate sector, but they focus on entirely different geographic regions.

Real estate investment trusts can provide income and diversification, but the choice between these two funds really comes down to whether an investor wants domestic or international exposure. RWR tracks publicly traded REITs in the United States, while HAUZ targets developed and emerging markets outside the U.S.

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-year return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.

HAUZ is the cheaper option with a 0.1% expense ratio compared to 0.25% for RWR. HAUZ also offers a higher dividend yield of 3.52% -- more than a quarter of a percentage point higher than RWR's 3.26%.

Performance & risk comparison

RWR has posted a notably strong 23.7% total return over the past year, outpacing the performance of international real estate over the same period. RWR has also outperformed HAUZ by a wide margin over the trailing five years, suggesting U.S. REITs have been the more rewarding corner of the real estate market for a sustained stretch, not just a recent quarter or two. That outperformance doesn't appear to be a function of added risk-taking, though -- RWR's beta of 0.97 and HAUZ's beta of 0.99 are both close to 1, meaning each fund moves roughly in line with the broader market.

What's inside

Launched in 2001, RWR provides access to a portfolio of publicly traded REITs operating within the United States. The fund holds 96 positions, led by Welltower (NYSE:WELL) at 10.6%, Prologis (NYSE:PLD) at 9.5%, and Digital Realty Trust (NYSE:DLR) at 4.7%.

HAUZ was designed to mirror the performance of international real estate markets outside the U.S. It's far more broadly diversified, holding 416 positions. Its top holdings include Goodman Group (ASX:GMG) at 4.2%, Mitsubishi Estate (OTC:MITEF) at 3.1%, and Mitsui Fudosan (TYO:8801) at 2.7%. HAUZ was launched in 2013.

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Which looks like the better buy

The right pick here really depends on what type of real estate exposure an investor is looking to add to their portfolio. RWR's superior returns over the past one- and five-year stretches are hard to ignore, and they come from familiar, easy-to-research names. Welltower, Prologis, and Digital Realty are all well-covered large-cap REITs that most investors can quickly get comfortable with. But that concentration is also the trade-off: with just 97 holdings and a heavier weighting toward a handful of top positions, RWR's fortunes are tied closely to the health of the U.S. commercial and healthcare real estate markets.

HAUZ is the more vanilla option here, and that's sort of the point. Its 0.10% expense ratio is less than half of what RWR charges, and its 415 holdings spread risk across dozens of countries and property types -- from Japanese office developers to Australian industrial landlords. That diversification hasn't kept pace with RWR's returns over the past one or five years, but it does mean U.S.-heavy investors aren't doubling down on the same domestic real estate exposure they may already have through other holdings.

What's notable is that RWR's outperformance hasn't come with a meaningfully different risk profile -- with betas of 0.97 and 0.99, RWR and HAUZ are both about as sensitive to broad market swings as the S&P 500 itself, so this isn't a case of one fund taking on more risk to chase returns.

Investors who already hold U.S. property exposure -- directly or through broad market index funds -- may still find HAUZ's international diversification and lower cost more useful for balancing a portfolio, even as RWR's higher returns make a solid case for staying put in U.S. REITs. In the end, the right choice depends on whether an investor wants to lean into the current strength of the domestic REIT sector or spread real estate exposure more globally at a lower cost.

Andy Gould has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Goodman Group and Prologis. The Motley Fool recommends Digital Realty Trust. The Motley Fool has a disclosure policy.