Post by Admin/YBB on Apr 7, 2021 6:30:33 GMT -6
REAL ESTATE [RE] has been included in the GICS 11 sectors [S&P, MSCI] since 2016. RE includes real estate investment trusts [REITs – AMT, CCI, SPG, WELL, EQR, BXP], RE operating companies [REOC – BAM, ARL], RE development companies [JOE], RE services companies [CBRE, JLL, CWK]; however, the mortgage mREITs are excluded as those remain under the financial sector. Note that in 2016, the old financial ETF XLF was split into the new financial ETF XLF and real estate equity ETF XLRE. Most of the listed RE entities are REITs – these have tax-preferences but are required to distribute 90% of income and have other requirements. In real estate, much of depreciation is available for distribution, so it has its own unique evaluation tools such as FFO [funds from operations], AFFO [adjusted FFO], capitalization rate [cap-rate], etc; specifically, the P/E ratios are not very useful for RE.
Examples of RE EQUITY mutual funds [OEFs] and ETFs include XLRE, VNQ/VGSLX, FRESX, CSJAX/CSRSX, TCREX/TRRSX/TIREX; CEFs include RFI, RQI, IGR, JRS, NRO. Most funds broadened their mandate from REITs to RE equity after 2016.
RE HYBRID funds [FRIFX] include RE equity, RE fixed-income and RE convertibles; they have lesser volatility than RE equity funds. There are only a few such funds.
DIRECT real estate is mostly/majority-owned and professionally managed RE but most are private funds or VAs [TIAA Real Estate Account VA (Nuveen/TIAA)]. A big issue is the handling of illiquidity of physical RE and there may be redemption restrictions, gates, or liquidity-guarantee mechanisms.
Leveraged mortgage mREITs [NLY, AGNC, STWD, BXMT, TWO] are still part of the financial sector [XLF]. These leveraged MBS [bond] portfolios are very interest rate sensitive. mREITs ETFs include REM, MORT.
There are foreign and global RE funds. But RE in many countries is more speculative and there may be PFIC tax issues for the US investors.
Avoid private or NON-TRADED REITs as those are illiquid and one can get out of those early only with significant haircuts. Their promoters have incentives of high commissions. So, they are easy to get in, but tough to get out, like a roach-motel. The SEC and FINRA have issued investor alerts for them.
The focus here has been on tradable RE stocks and funds. But OWNING real estate and RENTING may also suit some. It has advantages and disadvantages and may not be easily scalable.
Examples of RE EQUITY mutual funds [OEFs] and ETFs include XLRE, VNQ/VGSLX, FRESX, CSJAX/CSRSX, TCREX/TRRSX/TIREX; CEFs include RFI, RQI, IGR, JRS, NRO. Most funds broadened their mandate from REITs to RE equity after 2016.
RE HYBRID funds [FRIFX] include RE equity, RE fixed-income and RE convertibles; they have lesser volatility than RE equity funds. There are only a few such funds.
DIRECT real estate is mostly/majority-owned and professionally managed RE but most are private funds or VAs [TIAA Real Estate Account VA (Nuveen/TIAA)]. A big issue is the handling of illiquidity of physical RE and there may be redemption restrictions, gates, or liquidity-guarantee mechanisms.
Leveraged mortgage mREITs [NLY, AGNC, STWD, BXMT, TWO] are still part of the financial sector [XLF]. These leveraged MBS [bond] portfolios are very interest rate sensitive. mREITs ETFs include REM, MORT.
There are foreign and global RE funds. But RE in many countries is more speculative and there may be PFIC tax issues for the US investors.
Avoid private or NON-TRADED REITs as those are illiquid and one can get out of those early only with significant haircuts. Their promoters have incentives of high commissions. So, they are easy to get in, but tough to get out, like a roach-motel. The SEC and FINRA have issued investor alerts for them.
The focus here has been on tradable RE stocks and funds. But OWNING real estate and RENTING may also suit some. It has advantages and disadvantages and may not be easily scalable.