As Real Estate Rockets Upward, Grab International Exposure with ‘GQRE’
US real estate seems to be on an all-time rise, and as it keeps getting higher, ETF investors can use funds like that FlexShares Global Quality Real Estate Index Fund (GQRE).
According to a Bloomberg report, “Blackstone Group Inc. President Jon Gray has some advice for investors looking to understand the wild real estate market in the US: Don’t be afraid of going bankrupt.”
“Home prices have risen the most since 2005, cheap mortgages are encouraging buyers to new homes, and building costs are rising due to rising raw material prices,” the report said. “At the same time, the lack of labor means that the new building will not meet the increasing demand. And in the case of commercial real estate, the wider acceptance of remote work during the Covid-19 pandemic threatens to decimate office real estate. “
According to the fund description, GQRE aims to achieve investment results that generally correspond to the price and return performance before fees and expenses of the Northern Trust Global Quality Real Estate Index. The Index is designed to reflect the performance of a selection of companies that have greater overall exposure to quality, value and momentum factors compared to the Northern Trust Global Real Estate Index.
“Investing in the real estate sector has the potential to add growth, diversification and income to a portfolio, as well as possible protection against the risk of long-term inflation,” said an article by FlexShares Fund Focus. “We believe that a well-diversified and global approach to real estate investing is key to unlocking the full spectrum of these potential benefits.”
Real estate as protection against inflation
Since the capital markets expect rising interest rates, real estate can serve as an ideal protection against inflation. Compared to bonds, real estate dividend yields can historically offer higher returns.
“Our research suggests that real estate stocks have traditionally been used as a potential hedge against long-term inflation as some types of real estate stocks have proven to be less resilient to rising interest rates,” said FlexShares. “Historically, we believe that real estate investments have delivered higher dividend yields than other stock classes and provide an alternative source of income.”
“Finally, we believe that real estate has historically had low correlation with both fixed income and other equity investments,” added FlexShares. “As a result, real estate can further diversify an already well-diversified portfolio.”
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