Investing in Real Estate? VNQI Goes Global While GQRE Focuses on Quality.

The main differences between FlexShares Global Quality Real Estate Index Fund (NYSEMKT:GQRE) and Vanguard Global ex-U.S. Real Estate ETF (NASDAQ:VNQI) come down to cost, geographic exposure, and recent performance, with VNQI offering a lower fee and wider international diversification.

Both GQRE and VNQI aim to give investors access to real estate equities, but their approaches diverge: GQRE focuses on global REITs with a quality tilt, while VNQI tracks real estate stocks across more than 30 non-U.S. countries. This comparison looks at cost, returns, risk, and what you actually own inside each ETF.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500; beta is calculated from five-year weekly returns. The 1-yr return represents total return over the trailing 12 months.

VNQI looks more affordable with a lower expense ratio, and it also offers a slightly higher dividend yield than GQRE, which may appeal to income-focused investors.

Performance & risk comparison

What's inside

VNQI invests in more than 700 real estate stocks outside the U.S., spanning over 30 countries and providing broad international diversification. Its top positions include Goodman Group (OTC:GMGSF), Mitsui Fudosan (OTC:MTSFY), and Mitsubishi Estate (OTC:MITEY), with real estate making up 71% of the portfolio and a fund history stretching over 15 years. The fund’s sector mix leans heavily on global property companies, and its large assets under management (AUM) could support ease of trading for larger investors.

GQRE holds 170 securities with a focus on quality global real estate investment trusts (REITs). The largest positions are American Tower (NYSE:AMT), Digital Realty Trust (NYSE:DLR), and Public Storage (NYSE:PSA).

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What this means for investors

VNQI is a much larger ETF than GQRE, which lends it less volatility and more stability. It also has a lower expense ratio and a slightly higher dividend yield, which will likely appeal to income investors. Its focus on global real estate companies outside of the U.S. may appeal to investors who are concerned about the U.S. segment, which is dealing with persistently high interest rates compared to 2020-2021, as well as political uncertainty that could affect the housing and commercial real estate landscape.

According to Cohen & Steers, the global real estate market is set to outperform U.S. real estate for the first time since 2017, with global REITs up 10.4%, compared with U.S. REITs, which are up 4.5% over the same period. Asia Pacific and Europe are especially strong.

But the U.S. still makes up about 60% of the total global real estate market, and it's historically been hard to bet against its long-term success in the industry. While much smaller than VNQI, GQRE's focus on quality REITs has led it to outperform VNQI over the past five years.

ETF investing is a wise approach when it comes to the real estate sector, as bundling a large collection of companies together can mitigate the downside risk of any one company in an inherently risky sector. Investors who are all in on real estate may benefit from owning both ETFs, or at least selecting a handful of strong U.S. REITs to go along with their international real estate exposure.

Glossary

ETF (Exchange-Traded Fund): A fund that trades on stock exchanges, holding a basket of assets like stocks or bonds.
Expense ratio: The annual fee, as a percentage of assets, that a fund charges its shareholders.
Dividend yield: Annual dividends paid by a fund divided by its share price, shown as a percentage.
Beta: A measure of a fund's volatility compared to the overall market; higher beta means greater price swings.
AUM (Assets Under Management): The total market value of assets that a fund manages for investors.
Max drawdown: The largest percentage drop from a fund’s peak value to its lowest point over a specific period.
REIT (Real Estate Investment Trust): A company that owns or finances income-producing real estate, often traded like stocks.
Quality tilt: An investment strategy focusing on securities with strong financial health and stable earnings.
International diversification: Investing in assets from multiple countries to reduce risk from any single market.
Sector allocation: The distribution of a fund’s investments across different industries or sectors.
Holdings: The individual securities or assets owned within a fund or portfolio.

Sarah Sidlow has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends American Tower, Digital Realty Trust, and Goodman Group. The Motley Fool has a disclosure policy.