Asset formula

First look at the Virtus Real Asset Income ETF (NYSEARCA: TRUE)

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(This article was co-produced with Hoya Capital Real Estate)


I recently wrote about the Blackstone/GSO Long-Short Credit Income Fund (BGX) where, despite the name, does not appear to have sold any assets short for years. There are target term funds that have assets that mature years after their termination date, making them more of a term fund.

This article was supposed to be the second in a series of articles looking at funds that want to provide investors with returns that exceed the long-term effects of inflation, “real returns.” The first covered the SPDR SSGA Multi-Asset Real Return ETF (RLY), depending on who executes their strategy by holding other ETFs to provide exposure to assets they believe will beat inflation. The Virtus Real Assets Income ETF (NYSEARCA: TRUE) name tripped me up. Real asset funds and real return funds may not ultimately aim to provide returns above inflation, even if their asset combinations are close.

The index used by VRAI holds real assets with a dividend growth strategy. As you’ll see, the three asset classes they use have some industry exposure, with real asset companies not what most investors would look for to beat inflation, such as public service actions.

Virtus Real Assets Income ETF Review

Seeking Alpha describes this ETF as follows:

Virtus Real Asset Income ETF is managed by Virtus ETF Advisers LLC. It invests in the public stock markets of the United States. It invests in stocks of companies operating in the mortgage real estate investment trusts (SPI), financial services, diversified financial services and real estate sectors. The investment seeks investment results which correspond, before fees and expenses, to the price and yield performance of the Indxx Real Asset Income Index. VRAI started in early 2019.

Source: TRUE

TRUE has $145 million in assets and has a forward yield of 3.5%. The ETF charges 55 basis points in fees. Managers provide two sets of useful information:


  • Targeted Exposure — Provides passive exposure to real asset equity securities that have a history of generating income.
  • Powerful diversifier — Offers an alternative to traditional equity and fixed income investments.
  • Focus on Dividend Growth — Focuses on companies that have shown dividend growth over the past three years.


  • Investment universe of US-listed equity securities paying dividends in three real asset classes: infrastructure, real estate and natural resources.
  • Each real asset class includes the top 30 dividend-paying stocks systematically selected from the top 60 dividend-paying stocks in the class.
  • Portfolio of 90 stocks, equally weighted and rebalanced quarterly.

Source: Fact Sheet TRUE

Indxx Real Asset Income Index Review

The index provider describes its index as:

The Indxx Real Asset Income Index tracks the performance of US-listed securities in real assets (real estate, natural resources and infrastructure), as identified by Indxx, that have a history of dividend growth. The index was back-tested to December 31, 2013 and has a live calculation date of January 31, 2019.


They provide a table from the start of back-testing.



My math is that IVRAI has returned 6.65% since inception. The 71% increase is about 4 times the change in the CPI since the index started backtesting, which I estimated at 1.7% per year.

The index has 86 components and posted a return of 5.1%, based on data for the past 12 months. Key statistics were provided:


While the recent beta is well below 1, last year it was over and since inception it almost matches the movements of the S&P 500. Compared to SPY, since inception the INDXX is higher : 17.86% against an estimate of 13.8% for SPY. The index provider has a methodology PDF that details the index rules. Key was the industries that will be considered and the fact that each component is equally weighted, with MLPs capped at 20%. The index is replenished in December and rebalanced quarterly.

Indxx Index Methodology PDF

REAL Holdings Review

VRAI currently owns 89 assets, divided into the following asset types:

Symbol TRUE; compiled by author

Apart from ADRs being non-US assets, a total of 36% of holdings are foreign, with Canada being the largest exposure outside of the US. Less than 10% of exposure is outside the Western Hemisphere. The best industry exposure I found was from Fidelity, but it was undated and may be from 12/31/21.


Main titles

REAL ETF; compiled by author

The Top 10 represents 13.25% and the Top 20 represents 15.5% of the portfolio. The rebalancing weight of each asset would be 1.1%, so these are the assets that have performed the best since the March rebalancing.

One person’s view of TRUE’s holdings

The following chart represents the top 10 holdings and contains data sourced from Seeking Alpha using their portfolio builder feature. With the exception of PHI and FCPT, dividend growth is greater than “C”, which is essential given that it is an index selection criterion.

Looking for the Alpha Portfolio function; compiled by author

Personal observations include:

  • Of the industries listed, I question Food Products and Renewable Energy Management/Development as being real asset companies compared to others listed.

  • About 35% of the portfolio is made up of stocks targeted by ESG, climate activists and progressives in Congress. These pressure groups could affect their future.

  • Utilities face some of the same pressures as energy stocks. Most utilities without a large unregulated segment will be limited in their ability to grow their dividends.

  • While REITs are spread across all economic sectors, most have inflation clauses in their agreements, which increases the chances that they will be able to increase their payouts.

  • Netflix’s recent results challenge the growth strategies that many telecom service companies depend on. With slowing population growth in the United States, new customers will become more expensive to obtain.

Examination of the TRUE cast

Symbol TRUE

Search DVD Alpha TRUE

The yield hovered around 4% until the price of TRUE started to climb in 2022. This is much less than the index document indicated, but the calculations are potentially different.

Portfolio strategy

From what I’ve found looking at real asset funds and other funds that “fight” inflation, is that they don’t always do well when inflation is low. I-bonds have recently enjoyed wide coverage with a new rate expected close to 9% for the next six months. Unfortunately, this rate for purchased I-bonds no longer has a fixed component, meaning investors only need to match inflation as measured by the CPI index used for these bonds.

Real asset funds seem to be best for buy and trade versus buy and hold. Assuming TRUE was its 2013 lookback index, investors would have gained 6.65%, better than inflation, but with average inflation below 2%, that was easy to do. Look what a simple balanced fund has done, in this case the Fidelity Balanced Fund No Load (FBALX) since 2013.

Data by YCharts

This equates to a CAGR of 10.45% against the underlying index of 6.65% TRUE. That said, the fund’s performance reversed in 2022 as inflation, particularly in fossil fuels, soared. Like real return funds, real asset funds may be for traders, not buy/hold investors.

TRUE against single sector ETFs

Personally, I like funds that are more targeted than the VRAI, so I compared four of them to what the VRAI index has done since. They have led three of the four selected since 2014, when this comparison began.

  • For REITs: Vanguard Real Estate ETF (VNQ)
  • For Infrastructure: ProShares DJ Brookfield Global Infrastructure ETF (TOLZ)
  • For natural resources: SPDR S&P Global Natural Resources ETF (GNR)
  • For MLPs: ALPS Algerian MLP ETF (AMLP)


Portfolio Viewer

If you assume that MLPs are sufficiently hedged by GNR (TRUE holds very little), with quarterly rebalancing, an equally weighted portfolio of the top three had a CAGR of 7.6%, nearly 100 basis points ahead of the TRUE index since 2013. The spread was around 30 basis points smaller if a buy/hold strategy was used. This tells me that VRAI’s dividend growth criteria does not add Alpha for their investors compared to those using a combination of these ETFs. I admit that the comparison is not perfect.

TRUE provides an interesting collection of assets, across three main allocations. Although I like targeted funds, they execute their strategy well for Buy/Hold investors. Active traders should look elsewhere.

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