Expecting a safe haven, REIT investors found no calm in 2018

Real estate focused exchange traded funds fell 6.2% last year

Jan.January 07, 2019 03:30 PM

(Credit: iStock)

Investors across the country increasingly turned to real estate investment trusts in 2018 as a way to diversify from a volatile stock market, but things didn’t always go quite as planned.

Mutual funds and exchange-traded funds (or ETFs) focused on real estate fell 6.2 percent on average last year, according to the Wall Street Journal. The decline on the price of the funds was largely due to the recent overall sharp drop in the stock market.

Real estate ETFs are attractive because they allow investors to put money into real estate without having to pay the property fees and other costs of investing in property directly. Investors also believe real estate will provide a steady income stream when the stock market declines.

Taubman Centers, GGP, CBL and just about every REIT in the mall and shopping center business have been forced into a frenzied search for new tenants and new strategies to fill storefronts left empty by struggling retailers. Some outliers included like Simon Property Group, reported better results.

The downturn in ETF prices show that the real estate market was perhaps more tied to the overall stock market than investors had initially presumed.

But investors still poured. Investment groups started up a number of new ETFs in 2018.

At the end of November, there were 48 U.S. real estate ETFs with total assets of $66 billion, from 23 providers on three exchanges, the Journal reported.

The top five real-estate-focused ETFs are Vanguard Real EstateETF, Vanguard Global ex-U.S. Real Estate ETF, Schwab U.S. REIT ETF, iShares Real Estate and Real Estate Select Sector SPDR Fund. [WSJ] — Keith Larsen

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