As Real Estate Rebounds, Consider an Actively Managed REIT
In a low interest rate environment, investors often rely on sectors with a tradition of supplying income goods. Real estate is one of them, but after the group’s coronavirus swoon, active management could provide better service to investors in this space.
Enter the ALPS Active REIT ETF (NASDAQ: REIT). The benefits of active management with Real Estate Investment Trusts (REITs) include avoiding potential dividend cuts and corners of the sector that are prone to underperforming the broader sector.
“It’s not yet that REITs are out of the woods – picking them up in Covid cases that trigger re-bans would almost certainly make them swoon while it remains unclear how many people are returning to the office or shopping in the store want shopping mall. But those risks are getting smaller every day, and a lot of this bad news is already reflected in the share price, ”says Barron’s Ben Levisohn.
The actively managed REIT is also being used for another major issue that is currently permeating financial markets: the increase in COVID-19 vaccinations.
As an actively managed fund, REIT can focus on relevant areas of the real estate sector such as hotel and retail REITs. Conversely, REIT can use this active management to increase exposure to some of the more durable real estate segments such as healthcare, industrial and technology REITs.
“Global travel restrictions and the cancellation of vacation plans by consumers have led to a massive drop in occupancy in the hotel industry. Malls across the country have been closed for several months and many retailers are struggling with consumers changing many of their online shopping habits. And although the industrial and self-storage sectors initially declined, they have outperformed the broader real estate sector since early 2020. These sectors do better as they should be relatively isolated from the virus’ worst impact on the global economy. “According to Morningstar research.
Other REIT ETFs are the Schwab US REIT ETF (NYSEArca: SCHH) and the Pacer Benchmark Data and Infrastructure Real Estate SCTR ETF (SRVR).
You can find more information on cornerstone strategies in our ETF Building Blocks Channel.
The opinions and predictions expressed here are solely those of Tom Lydon and may not actually be fulfilled. Information on this website should not be used or construed as an offer to sell, the solicitation of an offer to buy, or a recommendation for any product.