Cohen & Steers ETF Taps Into Anticipated Global Real Estate Boom

A lot of hot money has flowed into emerging-market economies in the last two years, Karydakis said, which in turn has fueled a rally in real estate, primarily residential but also commercial, in countries such as Singapore and Thailand.

"The reason for that hot money flowing en masse in those economies is that people have been borrowing at ridiculously low short-term rates in the U.S. and eurozone, and it's a very cheap source of borrowing that international investors and speculators enjoy," he said. "They take advantage of that to invest in emerging markets in a major way. And that has caused some red-hot real estate markets in some parts of Asia, particularly China, Singapore and Hong Kong."

Each of the 75 companies in the Global Realty Majors ETF meets minimum size and liquidity requirements, and Cohen & Steers then chooses the companies within the fund and the index based on their quality.

"We know all of these companies well because we're investing in them on an active basis in our other funds," Yablon said. "We know the companies' management teams very well, we've visited the properties, we know what's happening in the local markets, we understand the business model, and we understand the cost of capital and their ability to grow the asset base through acquisitions."

Different countries have slightly different dynamics, he noted, but Cohen & Steers is seeing the most dramatic growth in London, Hong Kong and some parts of the United States.

Tom Lydon, president of Global Trends Investments and editor and owner of ETFtrends.com, said he met with a group from Cohen & Steers a few weeks ago to learn more about the firm's ETF. As the ETF market matures, Lydon said, the challenge for companies is to "pick their spots" and focus on a niche.

"Pretty much every index that has been created has an ETF that's following it," Lydon said. "What's going on now is that all the real estate has been taken and populated with ETFs in terms of asset-class sectors and regions. Providers that want to enter the ETF space now have had to be creative."

This article is part of AdvisorOne's monthlong Special Report at ETFs and their use by advisors. See the previous reporting on ETFs here.