WMRE: Let’s start with performance. What were the highlights for the month?
John Worth: REITs are now in positive territory vs. where they were on Feb. 21, 2020, which is our “marker” for the beginning of the COVID period. So, they have now experienced a full recovery in terms of share prices.
It’s an important guidepost for REITs to pass. And, in fact, if you look at the full 14 months from Feb. 21, 2020 to April 23, 2021, you see that REITs are up over that 14-month period by 2.1 percent.
Every previous time we’ve talked, they’ve been red for the COVID period.
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I last wrote about real estate investment trusts in February 2020, but a lot has changed since then. In this article, I ll explain why REITs can still fill a role in a portfolio but aren t necessarily a must-have for diversification.
Diversification Benefits Waning
As with my previous article, I ll focus on investing in equity real estate securities, primarily real estate investment trusts. REITs are companies that own and/or operate real estate properties, including shopping malls and other retail outlets, office buildings, warehouses, apartment buildings, and hotels.
Because its performance can be highly cyclical and idiosyncratic, real estate has generally had a lower correlation with both equities and fixed-income securities than most other asset classes. Over the period from 1972 through Feb. 28, 2021, the correlation between the FTSE Nareit Equity REITs Index and the S&P 500 averaged about 0.59. (A correlation of 1.0 would indicate two assets moving in perfect lock step,
Private credit, infrastructure lead pack with double-digit increases
Photo: Nicole Delaney
John Delaney said institutions are especially interested in infrastructure investments that also have a focus on environmental or governance issues.
Investor views of some alternative investments altered by the COVID-19 crisis and persistent low interest rates appear to have affected the holdings of the 200 largest retirement plans in
Pensions & Investments annual survey.
Aside from private credit assets, which nearly doubled in the 12 months ended Sept. 30, the asset class with the largest increase was infrastructure, up 21.5% to $41.3 billion.
But compared to infrastructure, other real asset sectors languished, with real estate equity eking out a 4% increase to $369 billion, real estate investment trusts down 19.8% to $28 billion, and energy dropping 21.8% to $24.1 billion.