Choosing Between Global Real Estate ETFs: Performance, Cost, and Diversification Strategy

Understanding Your Options

When building a portfolio with real estate investing tips, two major exchange-traded funds deserve attention: VNQI (Vanguard Global ex-U.S. Real Estate ETF) and GQRE (FlexShares Global Quality Real Estate Index Fund). While both provide exposure to international real estate markets, their underlying strategies, fee structures, and recent performance paint quite different pictures for investors weighing their options.

The Cost Advantage and Fee Comparison

One of the most striking differences lies in the expense ratio—VNQI charges just 0.12% annually, while GQRE comes in at 0.45%. For long-term investors, this fourfold difference in costs can substantially impact returns. Beyond fees, VNQI also delivers a marginally higher dividend yield at 4.27% versus GQRE’s 4.06%, making it particularly attractive for those prioritizing income generation from their holdings.

The size disparity between these funds is equally notable. With $3.9 billion in assets under management compared to GQRE’s $359.7 million, VNQI benefits from greater liquidity and tighter bid-ask spreads—advantages that matter significantly for larger institutional investors and those trading in substantial positions.

Performance Metrics Tell Different Stories

Looking at recent performance, VNQI has demonstrated stronger momentum, delivering 15.9% over the trailing twelve months as of December 18, 2025, substantially outpacing GQRE’s 3.6% return during the same period. However, the five-year picture becomes more nuanced.

GQRE’s focus on quality REITs—those with stronger financial fundamentals and more stable earnings—positioned it to weather downturns more effectively. Its maximum drawdown over five years reached 16.24%, compared to VNQI’s 6.71%. Yet this defensive positioning came with a cost: a $1,000 investment in GQRE five years ago would have grown to approximately $1,043, while the same amount in VNQI would have declined to $851.21.

VNQI exhibits lower overall volatility, with a beta of 0.88 compared to GQRE’s 1.02, indicating relatively steadier price movements relative to broader market benchmarks.

Inside the Portfolios: Geographic and Sectoral Differences

VNQI’s investment universe spans more than 700 real estate securities across 30+ non-U.S. countries, delivering comprehensive international diversification. Major holdings include Goodman Group, Mitsui Fudosan, and Mitsubishi Estate, with real estate comprising 71% of the fund’s composition. This broad-based approach captures opportunities across diverse geographic markets and property types.

GQRE takes a more concentrated approach, holding approximately 170 securities with deliberate emphasis on quality metrics. Its largest positions—American Tower, Digital Realty Trust, and Public Storage—represent higher-quality REIT operators with proven track records and strong competitive moats. This selective approach inherently limits geographic breadth but potentially enhances portfolio quality.

Global Market Dynamics Shifting the Landscape

Recent market developments suggest that international real estate markets may be entering a period of relative outperformance. According to leading market analysts, global REITs have advanced 10.4% over recent periods, compared with U.S. REITs climbing 4.5%. Asia Pacific and European real estate markets have shown particularly robust strength. This represents a significant shift, marking the first time since 2017 that international real estate appears positioned to outperform its U.S. counterpart.

However, context matters: the United States still represents approximately 60% of the total global real estate market capitalization, and historically, betting against sustained U.S. real estate success has proved challenging for long-term investors.

Investment Considerations and Strategy

For income-focused investors seeking lower costs and higher yields, VNQI presents a compelling profile. Its substantial asset base, minimal expense ratio, and global exposure address several key investment criteria. Conversely, investors prioritizing capital preservation through quality-oriented holdings may find GQRE’s selective approach more aligned with their risk tolerance, despite its higher fees.

ETF-based real estate investment offers inherent advantages by distributing risk across numerous holdings, thereby mitigating the concentrated downside risk associated with individual property companies or operators.

A practical approach for committed real estate investors involves combining both strategies—maintaining core exposure through one fund while selectively adding individual strong-performing REITs to capture specific geographic or property-type opportunities. This hybrid methodology balances diversification benefits with the ability to capitalize on high-conviction positions.

Key Metrics Comparison

Essential Terms for Real Estate Investors

ETF: A tradeable fund structure holding diversified asset baskets, enabling efficient exposure to broad market segments.

Expense Ratio: Annual management fees expressed as a percentage of fund assets, directly impacting net investor returns.

Dividend Yield: Annual distributions relative to share price, calculated as a percentage and indicating income generation potential.

Beta: Volatility measurement comparing fund price movements to overall market benchmarks; values below 1.0 suggest relative stability.

Assets Under Management: Total portfolio value administered by the fund, often correlating with liquidity and trading efficiency.

Maximum Drawdown: The peak-to-trough percentage decline experienced during specific measurement periods, reflecting downside risk exposure.

REIT: Legal structure enabling real estate asset ownership with stock-like tradability and mandatory distribution requirements.

Quality Metrics: Financial screening emphasizing earnings stability, competitive positioning, and operational excellence.

International Diversification: Geographic portfolio distribution reducing concentration risk within single markets or regions.