1. I'm assuming there are no ETF equivalents of REITs in Canada. Correct?

  2. Why are REITs income trusts, not ETFs? Why not operate a Real Estate ETF?

Gill, Madura. Personal Finance, 4th Canadian Edition 2019. p 312. Emboldenings are mine.

screenshot of textbook page

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    Please don't post pictures of text: please transcribe the relevant portions. – TripeHound Aug 12 at 8:04

A REIT portfolio may consist of apartment complexes, health care facilities, hotels, office buildings, retail centers, pipelines or other forms of real estate, often in a specific sector. In the US, to qualify as a REIT, the company must comply with applicable IRS provisions. I assume that it's the same in Canada.

An ETF trades on a stock exchange and consists of various securities such as stocks, bonds or commodities.

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    There's no requirement that ETFs must track some index. ETFs started out linked to indexes but there are many that are not based on an index. Alternatives and active management strategies come to mind. Also, currently there are 35-40 REIT ETFs in the US. – Bob Baerker Aug 11 at 15:20
  • I suggest you amend your last paragraph to show that ETFs can also hold interest in REITs. – D Stanley Aug 12 at 13:20
  • @ThePhoton Indeed, "actively managed" ETF does exist. – mootmoot Aug 12 at 15:54

I'm assuming there are no ETF equivalents of REITs in Canada. Correct?

Incorrect. A quick google for "reit etf canada" found iShares S&P/TSX Capped REIT Index ETF with the description "Exposure to Canadian Real Estate Income Trusts (REITs)"

  1. There are at least 6 REIT ETF in Canada. Bear in mind that, an ETF doesn't limit its portfolio to the local market.

  2. It seems you are confused with an income trust fund with ETF. A REIT will deal directly with the properties it bought/rent. While REIT ETF is simply spread the investment by choosing the REIT it wants to buy.

Even though being called as income trusts, there is no guarantee that REIT will act upon the best interests of the investor, this is well described in this article : When REITs Lead To Large Losses. e.g. the broker who establishes a REIT can set up a proxy company that charge hefty managing fees and make the REIT appoint it to siphon the income, no matter how the property market is doing. In addition, the high annual REIT fees management will further dwindle down the trust holders returns. Since REIT trust holders don't have any rights to audit nor questions such practice, it is usually a bad investment portfolio in the first place.

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