Investors seeking high yields have an alternative to corporate junk bonds. Mortgage REITs (mREITs) can generate high yields and serve as a powerful complement to a fixed income or real estate equity portfolio.
AXS Real Estate Income ETF (RINC) seeks to track the performance of the Gapstow Real Estate Income Index (GREI), a portfolio of stocks of U.S. publicly traded real estate investment trusts (REITs) that own commercial and residential mortgages and mortgage-backed securities. RINC empowers investors with access to the potentially high yields of mREITS and to participate on the credit side of the real estate world.
Access to a diversified set of all mortgage REITs - commercial and residential - with more than $500M in market capitalization.
mREITs can take advantage of timely opportunities in real estate caused by market disruptions, evolution in mREIT markets and elevated interest rates.
The Fund tracks a well-diversified mREIT index managed by Gapstow Capital Partners, an authority on alternative credit investing and advisor to investment firms.
Gapstow Real Estate Income Index (GREI)
The Gapstow Real Estate Income Index (GREI) consists of common stocks of U.S. publicly traded real estate investment trusts (REITs) that focus on owning commercial and residential mortgages and mortgage-backed securities. GREI adheres to a targeted allocation consisting of the following sectors:
- Commercial mREITs: 50%
- Agency Residential mREITS: 25%
- Non-agency Residential mREITs: 25%
To maintain its diversified exposure, the index is rebalanced every quarter among these sectors and weighted equally among the constituents within each sector. See FAQs for more about the index.
About the Index Provider
Gapstow Capital Partners is a NYC-based management consulting firm that specializes in advising senior leaders of alternative credit investment management firms on business strategy and investment issues. It manages over 30 credit-based indexes. Chris Acito is the Chief Executive of Gapstow, which he founded in 2009, and brings over 30 years of experience in strategic consulting, credit investing and global business management.
Exchange: NYSE Arca
Inception Date: 8/28/2023
Distribution Frequency: Monthly
Management Fee: 1.25%
Total Annual Operating Expense: 1.25%
Net Expense*: 0.89%
* The Fund's investment advisor has contractually agreed to waive its management fee for a period of two years from the date of the reorganization of the Predecessor Fund into the Fund as follows: 0.36% on the first $500 million of Fund assets and 0.55% on Fund assets greater than $500 million. The Fund was reorganized from the High Yield ETF (the “Predecessor Fund”) on August 25, 2023.
Frequently Asked Questions
Where is the fund traded?
The ETF trades on the New York Stock Exchange (NYSE) Arca under the ticker RINC.
When did RINC launch?
The AXS Real Estate Income ETF (RINC) was launched on August 28, 2023.
How did the fund get reorganized?
The Predecessor Fund was the High Yield ETF, which went by the ticker HYLD, and was incepted on November 30, 2010. As August 25, 2023, it was adopted by AXS Investments and renamed the AXS Real Estate Income ETF with the new ticker RINC.
RINC began to be managed using a different investment objective and strategy than the original predecessor fund. Prior to the fund reorganization, HYLD was an actively managed fund that sought high current income with a secondary goal of capital appreciation by investing in a portfolio of high yield debt securities. Following the reorganization, RINC became a passively managed fund that seeks to track the performance of a bespoke index consisting primarily of common stocks of U.S. mortgage REITs.
Who manages RINC?
AXS Investments serves as the fund’s investment adviser. Parker Binion and Travis Trampe from AXS Investments are the portfolio responsible for the day-to-day management of the Fund’s portfolio, which tracks a real estate index.
What index does RINC track?
RINC seeks to track the performance of the Gapstow Real Estate Income Index (GREI). The index tracks the performance of the common equity shares of a portfolio of publicly traded mortgage REITs that own and/or originate real estate debt.
For how long has the GREI index been calculated? When did it go live?
The Gapstow Real Estate Income Index was developed by Gapstow Capital Partners and live, intra-day calculation of the index began on May 24, 2022. For historical purposes, GREI’s back-tested returns were created by Merqube from December 31, 2013, to May 23, 2022. For information on the index, click here.
Who is Gapstow Capital Partners?
Gapstow Capital Partners is a registered investment advisor with an exclusive focus on the alternative credit asset class. Gapstow’s services include providing investment advice on building credit portfolios, managing over 30 proprietary credit-based indices and consulting to alternative credit businesses. The New York-based firm was founded in 2009 by CEO Chris Acito, a recognized authority on alternative credit and co-founder of Casey Quirk.
What is a REIT?
Real estate investment trusts (REITs) are investment vehicles that focus on real estate that generally qualify for an exemption from registration under the ’40 Act and, as a result, are required to pay out at least 90% of their income to their shareholders in the form of dividends. REITs are also tax pass-through entities that produce 1099 reporting and are subject to regulatory scrutiny, board independence requirements and financial disclosure.
What is an mREIT?
Mortgage REITs are REITs that primarily own real estate debt, either by purchasing or originating mortgages and mortgage-backed securities. Typically, mREITs enhance returns by using leverage. An mREIT generates net income primarily from the interest collected from its underlying loans, less expenses such as financing costs, operating expenses, management fees, and incentive fees.
What types of mREITs are in the GREI index?
The Gapstow Real Estate Income Index is designed to allocate portfolio weights evenly between:
- Commercial mREITs (50%), and
- Residential mREITs (50%). Within residential, allocations are further split evenly between agency residential mREITs (25%) and non-agency residential mREITs (25%).
What is the difference between Agency and Non-Agency mortgages?
Within residential mortgages, it is important to distinguish the two:
- Agency mortgages conform to the requirements of government and quasi-government agencies (e.g., Ginnie Mae, Freddie Mac, Fannie Mae) in order to be purchased, insured and securitized by these agencies.
- Non-Agency mortgages do not typically conform to agency standards and are securitized by private companies. They are sometimes called “private mortgages.”
Why makes mREITs a potential source for high yields?
mREITs generally qualify for an exemption from registration under the 1940 Act, which allows them to use more leverage than other registered funds so long as they distribute at least 90% of their taxable income. In practice, leverage varies from three to nine times debt-to-equity depending on the type of mREIT.
Important Risk Information
You could lose money by investing in the Fund. There can be no assurance that the Fund’s investment objectives will be achieved.
Below are some of the risks associated with investing in the Fund. See the prospectus for more.
Mortgage REIT Risks: Mortgage REITs are exposed to the risks specific to the real estate market, the credit risk of the borrowers who own mortgaged properties and the risk that the value of mortgaged properties may be less than the amounts owed on the properties. They are also subject to interest rate risk, in which changes in the general level of interest rates which can lead to fluctuations in the value of a mortgage REIT’s investment in fixed rate obligations. Mortgage REITs typically use leverage and many are highly leveraged, which exposes them to leverage risk and the risks generally associated with debt financing. Leverage risk refers to the risk that leverage created from borrowing may impair a mortgage REIT's liquidity, cause it to liquidate at an unfavorable time and increase the volatility of the values of securities issued by the mortgage REIT.
Mortgage-Backed Securities Risk: Mortgage-backed securities represent interests in “pools” of mortgages held in trust and are subject to “prepayment risk” (the risk that borrowers will repay a loan more quickly in periods of falling interest rates) and “extension risk” (the risk that borrowers will repay a loan more slowly in periods of rising interest rates).
REIT Risk: Real Estate Investment Trusts are subject to risks associated with securities of companies participating in the real estate sector, such as declines in the value of real estate, risks related to general and local economic conditions, decreases in property revenues, and increases in prevailing interest rates, property taxes and operating expenses.
ETF Risk: The Fund is an ETF, and, as a result of an ETF’s structure, it is exposed to the following risks: shares not being individually redeemable, cash transaction risk, fluctuation of net asset value risk, market maker risk, costs of buying or selling shares, trading issues risk.
Shares of ETFs are bought and sold at market price (not NAV) and are not individually redeemed from the ETF. Brokerage commissions will reduce returns. NAVs are calculated using prices as of 4:00 PM Eastern Time. The closing price is the midpoint between the bid and ask price as of the close of exchange. Closing price returns do not represent the returns you would receive if you traded shares at other times.