HAUZ vs. VNQ: Is This International Real Estate ETF a Better Buy for Income Investors?

Vanguard Real Estate ETF (NYSEMKT:VNQ) and Xtrackers International Real Estate ETF (NYSEMKT:HAUZ) both target real estate exposure, but differ sharply in regional focus, with VNQ focused on U.S. REITs and HAUZ spanning developed and emerging markets outside the U.S. HAUZ also features a slightly lower expense ratio and a higher yield.

Snapshot (cost & size)

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

While both ETFs feature relatively low expense ratios, HAUZ has slightly lower fees and also offers a higher yield, making it appealing for cost-conscious investors seeking income.

Performance & risk comparison

What's inside

HAUZ offers exposure to more than 400 real estate companies across developed and emerging markets outside the U.S. Its top holdings include Goodman Group (ASX:GMG.AX), Mitsubishi Estate Co. (8802.T), and Mitsui Fudosan Co. (8801.T), with no single name exceeding 4%.

VNQ, by contrast, holds around 150 U.S.-listed REITs. Its largest equity positions are Welltower Inc (NYSE:WELL), Prologis Inc (NYSE:PLD), and Equinix Inc (NASDAQ:EQIX), each representing a larger share of assets than HAUZ's top picks — and together compose nearly 20% of the total portfolio. VNQ provides pure U.S. exposure and also makes larger individual-company bets, while HAUZ can help diversify away from U.S. real estate cycles.

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What this means for investors

Real estate has had a complicated few years. Rising interest rates punished REITs broadly in 2022 and 2023, and while the sector has shown some recovery since, it hasn't recaptured the enthusiasm of the low-rate era.

VNQ is the more mainstream option -- it's one of the largest real estate ETFs on the market, backed by Vanguard's low-cost structure and a long track record. For investors who want straightforward exposure to U.S. commercial real estate -- from data centers and industrial warehouses to senior housing and cell towers -- VNQ delivers a diversified slice of the U.S. market in a single, easy-to-hold fund.

HAUZ makes a different bet. By venturing outside the U.S., it offers access to real estate cycles that don't always move in lockstep with the American market. When U.S. property values are under pressure -- as they have been in recent years -- international holdings can provide a cushion. The fund's slightly higher yield and lower expense ratio are modest advantages, but they can add up over time for income-focused investors.

When considering either of these ETFs, investors should also ask how much domestic real estate exposure they already have. For anyone holding a broad U.S. index fund, VNQ may actually introduce more geographic concentration than they realize. In that context, HAUZ isn't just an alternative to VNQ -- it can function as a complement to it, adding a layer of global diversification to a real estate allocation that might otherwise be entirely tied to the U.S. economy.

Neither fund is obviously "better." The right choice depends on an investor's existing portfolio, income needs, and appetite for international exposure.

Andy Gould 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.