REITs gain favor with investors amid hopes of economic recovery

FTSE Nareit U.S. real estate index has generated significantly higher returns than S&P 500 this year

National /
Aug.August 09, 2021 09:30 AM
Vanguard CEO Mortimer Buckley (Vanguard, iStock)

Vanguard CEO Mortimer Buckley (Vanguard, iStock)

Investors looking to take advantage of a global economic recovery in the second half of the year are increasingly turning to real estate investment trusts.

The broadest index of REITs in the United States, the FTSE Nareit All REITs index, sported a total return of more than 26 percent over the first seven months of the year, the Wall Street Journal reported, significantly higher than the 18 percent return generated by the S&P 500 over the same period.

REITs have benefited from investors hedging against inflation concerns, according to the Journal, as well as low yields in the bond market. REITs must pay out 90 percent taxable income as dividends to shareholders; the average dividend yield for the FTSE Nareit All REITs index is 3 percent.

According to the research firm CFRA, there are now 35 REIT exchange-traded funds managing almost $87 billion in total assets. While many of those funds are passively managed, the Journal reported that some are becoming more active in an attempt to generate greater returns for investors.

The biggest REIT ETF is the Vanguard Real Estate ETF, which manages approximately $40 billion in assets. The fund provided a 26.8 percent return from January to July and a 35.4 percent return over the past year.

Other REIT ETFs performing well in the first seven months of 2021 are the Nuveen Short-Term REIT ETF (35 percent return since January), the iShares Residential & Multisector Real Estate ETF (34 percent) and the Invesco S&P 500 Equal Weight Real Estate ETF (33 percent).

[WSJ] — Holden Walter-Warner





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