Active REIT ETFs Outperform Broader Markets in 2023
As we kick off the new year, active REIT ETFs have been making waves in the financial market, outpacing the broader markets. This comes as no surprise as real estate, in various forms, has a long-standing history of providing a reliable hedge against inflation and rising interest rates. The ability of REITs to push rents higher as demand for space grows has made them a go-to investment choice for many investors.
Three of Four Active REIT ETFs Outperforming
According to ETF Database, three of the four active REIT ETFs are outpacing the broader market ETFs year-to-date. The SPDR S&P 500 ETF Trust (SPY), the iShares Core S&P 500 ETF (IVV), and the Vanguard Total Stock Market ETF (VTI) are each up 6.5% and 7%, respectively.
What is REIT ETF?
A REIT ETF is a fund that invests in common equity securities of US REITs and real estate operating companies. It may also include preferred equity, cash, and cash equivalents. In selecting its constituents, the fund takes into consideration the intrinsic value of the properties held by REITs and the intrinsic value of the REITs in which the fund seeks to invest.
PSR: Second Place Among Active Real Estate ETFs
With a return of 8.60% year-to-date, PSR takes the second place among the active real estate ETFs. The fund structures its investments primarily from the FTSE NAREIT All Equity REITs Index, which has nearly 50 holdings primarily across mid- and large-cap equities. The selection process uses quantitative and statistical metrics to identify attractively priced securities and manage risk.
AVRE: Global Real Estate Stocks Outperform
AVRE is up 7.20% year-to-date, outpacing the broader markets. The fund invests in global real estate stocks that are expected to have higher returns or better risk characteristics. It holds real estate companies across various property sectors, including REITs and REIT-like entities, located in countries included in its benchmark index, the S&P Global REIT Index.
BLDG: The Only Fund Underperforming Broader Markets
BLDG is the only fund in the segment underperforming the broader markets in 2023, having returned 3.07% year-to-date. The fund provides exposure to a global basket of real estate securities, including REITs and real estate management and development firms. The selection process uses Cambria’s multi-factor algorithm, which includes value, quality, and momentum metrics.