Shares of the Fund may trade at prices that vary from Fund NAV. There also can be no assurance that the requirements of the Exchange necessary to maintain the listing of the Fund’s shares will continue to be met or will remain unchanged. In addition, trading in Fund shares on the Exchange may be subject to trading halts caused by extraordinary market volatility pursuant to the Exchange “circuit breaker” rules. Trading in Fund shares on the Exchange also may be disrupted or even halted due to market conditions or for reasons that, in the view of the Exchange, make trading in Fund shares inadvisable. Accordingly, if such parties determine not to perform their respective functions, this could, such as during times of market stress, in turn, lead to variances between the market price of the Fund’s shares and the underlying value of those shares and bid/ask spreads could widen. There is no obligation for market makers to make a market in the Fund’s shares or for Authorized Participants to submit purchase or redemption orders for creation units. There is no guarantee that the Fund will be able to attract market makers and Authorized Participants. Although the Fund’s shares are listed on the Exchange, there can be no assurance that an active, liquid or otherwise orderly trading market for shares will be established or maintained by market makers or Authorized Participants, particularly in times of stressed market conditions. As noted above, a REIT’s LES (and the REIT Dividend Yield Score, as discussed below) drive a REIT’s weighting in the Index at reconstitution.įund Shares Liquidity Risk. REITs for which an LES does not exist are systematically assigned to the LES-Neutral group. REITs in the Starting Universe for which there is an LES are divided into three groupings (based on the number of LES-scored REITs in the Starting Universe): LES-High (high relative percentage of REIT assets in Lionstone favored markets), LES-Neutral, and LES-Low (low relative percentage of REIT assets in Lionstone favored markets). The LES calculated for a REIT is based on the percentage of its assets held in Lionstone favored markets. In short, the LES focuses on the location of properties owned by a REIT relative to Lionstone’s favored real estate markets. cities and regions based on the particular real estate market’s growth potential, taking into consideration secular and cyclical trends in the particular market (e.g., employment, demographics, people migration). The Lionstone Exposure Score framework assesses a REIT based on the geographic location of its real estate assets, with Lionstone scoring U.S. If, however unlikely, all REITs in the Starting Universe receive the same overall rating from the model (and thus no 1-5 ratings are possible), then all REITs are assigned a rating of “3” (neutral) and all are eligible for inclusion in the Index at reconstitution. The Index is then systematically constructed to exclude all REITs rated a “4” or “5”, and include all companies rated a “1”, “2” or “3”. Initially and at Index reconstitution, to determine which REITs in the Starting Universe are initially eligible for inclusion in the Index, the Index methodology applies the results of the Investment Manager’s multi-factor real estate industry quantitative investment model to rate each REIT within the Starting Universe on a 1 through 5 basis, where “1” is the strongest rating, “3” is a neutral rating and “5” is the weakest rating, based on three main company factor composites: quality (such as earnings quality), value (such as cash flow yield), and catalyst (such as price momentum), with the distribution of ratings as follows: “1” = top 15% of REITs “2” = next 20% of REITs “3” = next 30% of REITs “4” = next 20% of REITs and “5” = bottom 15% of REITs.
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