David Letterman presents the top 10 reasons to invest in REITs.
But in that spirit, Arthur Hurley, lead portfolio manager of the SSgA/Tuckerman's Active REIT Strategy Fund has produced his own top 10 compelling reasons to own real estate investment trusts in these volatile times.
The fund is part of State Street Global Alliance LLC, a joint venture of State Street Global Advisors, Boston, and ABP, the e149 billion ($151.7 billion) Heerlen, Netherlands-based pension plan for Dutch government workers. The SSgA/Tuckerman REIT has $200 million in assets under management, about 15% of which is from tax-exempt institutional clients.
"The general perception in the investment world is that investing in REITs is nothing to get excited about." That's because the "public market REIT performance over the past five years has seen a fair amount of ups and downs," noted Mr. Hurley, who is based in Boston.
"However, in the (12 months ended) July 31, the asset class produced a total return of 12.02%, as measured by the Wilshire REIT index, far outpacing the Nasdaq's 34.24% loss and the Standard & Poor's 500's 23.61% loss," he said.
In short, he thinks REITs may have a stable platform that will allow them to reap attractive long-term risk-adjusted returns.
His top 10 list includes:
4) Returns. "REITs pay an attractive dividend of approximately 6.5%, which is about 230 basis points better than the 10-year Treasury rate."
3) Liquidity and ease of investing. "As an investment vehicle, REITs provide an easy and less expensive way to gain exposure to the asset class (that) is arguably more liquid than direct ownership."
2) Attractive valuations. "Even after last year's notable rally ... The equity REIT sector still trades at an estimated 0% to 5% discount to its net asset or liquidation values."
1) Low correlation to broader equity markets.