hello this week’s etf wrap looks at real estate funds with exposure to commercial properties an area of the market under pressure as investors worry lending is tightening after this month’s stress in the banking sector please send feedback and tips to christineidzelismarketwatchcom you can also follow me on twitter at cidzelis and find me on linkedin sign up here for our weekly etf wrap exchangetraded funds with exposure to commercial real estate have slid this month with the recent volatility in bank stocks exacerbating concerns over the property market the vanguard real estate etf vnq schwab us reit etf schh and real estate select sector spdr fund xlre have significant exposure to commercial real estate although the funds are diversified across various types of properties said aniket ullal head of etf data and analytics at cfra research in a phone interview all three have losses so far in march and for the year struggling to recover from a bruising 2022 for markets as the federal reserve rapidly hiked interest rates to tame high inflation shares of both the vanguard real estate etf and real estate select sector spdr fund plunged almost 29 last year while the schwab us reit etf tumbled nearly 27 according to factset data “the pocket of opportunity within commercial real estate is the publiclytraded reits” said greg kuhl portfolio manager for the global property equities team at janus henderson investors in a phone interview referring to real estate investment trusts “public reits are only 10 of commercial real estate overall” investors have been worried about commercial real estate after recent regional bank failures and “stress in the financial system” but compared with public reits private owners tend to borrow more based on the percentage of debt used to fund their property purchases according to kuhl also see commercial mortgages are a big 31 trillion share of bank holdings goldman sachs industrial properties appear to be a bright spot within commercial real estate cfra’s equity analysts are still “bullish” on companies found in the industrial area said ullal pointing to the top two holdings of the pacer industrial real estate etf inds public storage and prologis inc as examples public storage psa and prologis pld each represent around 15 of the fund’s holdings as of thursday according to portfolio data on the fund’s webpage the pacer industrial real estate etf inds has surpassed sp 500 gains so far this year up 64 through wednesday despite a 3 decline in march through the same date according to factset data the spdr sp 500 etf trust spy had a yeartodate gain of about 5 over the same period commercial real estate includes other types of properties such as offices apartments and retail as well as industrial “office exposure is a concern across the board” according to kuhl “we’re running at about 50 of precovid office attendance in the us” he said “that’s a big red flag in terms of future demand” read office property woes could be tip of iceberg if credit freezes up as 1 trillion bill comes due kuhl who expects offices to be the “main area” for problems within commercial real estate says that he likes industrial as a property type “we think that it has the best fundamentals in commercial real estate” he said citing “very high” occupancies “we think it’s going to be really durable even in a slower economic environment because there’s structural trends at play” he said explaining that companies are continuing to “build out their ecommerce fulfillment capabilities which requires a lot of warehouse space” meanwhile concern over “banking issues” led to march weakness for the janus henderson us real estate etf jre said kuhl along with larger real estate etfs with commercial real estate exposure shares of the vanguard real estate etf which has 31 billion in assets under management have dropped 64 this month through wednesday bringing its 2023 losses to 27 factset data show the schwab us reit etf with 5 billion in assets under management has fallen 57 over the same period this month for a yeartodate decline of 23 and the real estate select sector spdr fund’s 55 drop this month has left the 4 billion fund with 22 losses this year through wednesday janus henderson us real estate etf an actively managed fund is beating the much larger vanguard real estate etf schwab us reit etf and real estate select sector spdr fund based on yeartodate performance the janus etf which has around 5 million of assets had gains of 16 this year despite sinking 61 in march through wednesday according to factset data kuhl is a coportfolio manager for the fund “there’s much more exposure to office in private real estate than there is in public” said kuhl also “public reits really don’t use the bank debt market” much he said they typically turn to the corporate bond market for debt financing as opposed bank loans or commercial mortgagebacked securities according to kuhl who said a high percentage of the total market value for us public reits is tied to investmentgrade ratings “reits are usually well capitalized” said rich hill head of real estate strategy and research at cohen  steers in a phone interview “they have access to the senior unsecured bond market” blackrock’s ishares cohen  steers reit etf icf which tracks an index of largecap reits and has around 2 billion of assets under management was down 22 this year after falling 51 this month through wednesday factset data show the fund’s benchmark is the cohen  steers realty majors index equinix inc eqix prologis and american tower amt were the etf’s top three holdings as of wednesday according to data on blackrock’s website while properties such as offices have been under pressure hill said that other property types such as industrial and healthcare appear in “pretty good shape” after a rise in property valuations over the past five to 10 years as usual here’s your look at the top and bottomperforming etfs over the past week through wednesday according to factset data simplify asset management announced march 28 that it launched the simplify commodities strategy no k1 etf hard designed to provide investors a core commodity holding and a hedge against inflation   this stock etf keeps beating the sp 500 by selecting for quality marketwatch   investors pull nearly 4bn from ishares esg etf in one day financial times