• ETF Insights

    Global Listed Real Estate Securities: An Opportunity Hidden in Plain Sight

    Meghana Pakala, ETF Product Analyst
     

    Generally speaking, investors aim to have a properly diversified portfolio, combining exposures to a number of different asset classes. Thanks to some interesting characteristics, global listed real estate—an often-overlooked asset class—is certainly deserving of a second look. REITs (Real Estate Investment Trusts) make up a significant part of the global listed real estate sector.

    There are a number of other important benefits associated with global listed real estate. Investors can benefit from price appreciation of the underlying assets, the income generated by these global real estate companies can be relatively high (averaging a yield of 4%), and there are several different subsectors within the real estate space such as retail, offices, industrial locations, healthcare, and specialties like self-storage and datacenters, just to name a few, which can provide an additional layer of diversification.

    As an asset class, real estate also has the potential to protect investors from inflation, as rental agreements—a foundation of the income provided by real estate investments—are typically adjusted for inflation. While some investors may fear that interest rate hikes could have a negative impact on real estate investment due to the leverage utilized in some of these businesses, contrary to popular belief, the majority of periods that coincide with upward trending interest rates have actually provided positive returns for global listed real estate investors.

    The chart below by GPR shows that US REITs delivered positive returns for investors during periods of rising interest.

    REIT Total Returns and Rate Changes: 1990 to 2019 (Q1)

    REIT Total Returns and Rate Changes: 1990 to 2019 Q1

    Source: Global Property Research. Interest Rates Changes of 10-yr US Treasury.

    Some investors may be hesitant to invest in global listed real estate due to a fear that such companies are not in the best shape to weather another financial crisis. However, much has changed since the 2009 financial crisis: the balance sheets of many listed real estate companies have significantly improved, which has substantially diminished their interest rate sensitivity. Moreover, many real estate companies have also extended the maturity on their debt, effectively locking in lower rates for the coming years and further diminishing interest rate sensitivity.

    But wouldn’t it be better for investors to directly invest in real estate, if they’re looking for real estate exposure? Not necessarily. At first blush, direct real estate investment may appear like a viable diversification strategy, however these investments are typically far less liquid than listed real estate investments.

    Investors have been catching on to the substantial benefits that global listed real estate and REITs can offer, which is perhaps why the asset class has seen such tremendous growth over recent years, as seen in the chart below:

    Historical Growth of the U.S. REIT Market

    Historical Growth of the U.S. REIT Market

    Source: Global Property Research.

    The VanEck Global Real Estate UCITS ETF allows investors to gain exposure to this important asset class. The fund seeks to track the Global Property Research 100 Index, which covers the largest and most liquid real estate securities worldwide. The ETF offers cost-effective, diversified, transparent, tax-efficient exposure to global listed real estate, with a current total expense ratio of just 0.25%.

    Global listed real estate securities, including ETFs, allow investors to benefit from potentially high dividend yields, long-term capital appreciation, and diversification. Contrary to popular belief, listed real estate equities have demonstrated substantial resilience, capable of performing well even in a rising interest rate environment. With all of these benefits, it’s only a matter of time before global listed real estate securities receive the attention and appreciation they deserve.

    Important Disclosures

    This commentary originates from VanEck Investments Limited (“VanEck”) and does not constitute an offer to sell or solicitation to buy any security.

    VanEck Global Real Estate UCITS ETF is a sub-fund of VanEckTM ETFs N.V., organised under the laws of the Netherlands. Any investment decision must be made on the basis of the prospectus and the key investor information document (“KIID”), which is available at www.vaneck.com as well as from VanEck Asset Management B.V. (“VanEck ETF’s”) at its registered office at Barbara Strozzilaan 310, 1083 HN Amsterdam, The Netherlands Please read these documents before investing and take note of the risk factors. Past performance is no guarantee for future performance. All data is sourced as at the date stated.

    VanEck’s opinions stated in this commentary may deviate from opinions presented by other VanEck departments or companies. Information and opinions in this commentary are based on VanEck’s analysis. Any forecasts and projections contained in the commentary appear from the named sources. All opinions in this commentary are, regardless of source, given in good faith, and may only be valid as of the stated date of this commentary and are subject to change without notice in subsequent versions of the commentary. Any projections, market outlooks or estimates in this material are forward-looking statements and are based upon certain assumptions that are solely the opinion of VanEck. Any projections, outlooks or assumptions should not be construed to be indicative of the actual events which will occur.

    No investment advice

    The commentary is intended only to provide general and preliminary information to investors and shall not be construed as the basis for any investment decision. This commentary has been prepared by VanEck as general information for private use of investors to whom the commentary has been distributed, but it is not intended as a personal recommendation of particular financial instruments or strategies and thus it does not provide individually tailored investment advice, and does not take into account the individual investor’s financial situation, existing holdings or liabilities, investment knowledge and experience, investment objective and horizon or risk profile and preferences. The investor must particularly ensure the suitability of an investment as regards his/her financial and fiscal situation and investment objectives. The investor bears the risk of losses in connection with an investment.

    Before acting on any information in this publication or report, it is recommendable to consult one’s financial advisor.

    Forecasts, estimates, and certain information contained herein are based upon proprietary research and the information contained in this material is not intended to be, nor should it be construed or used as investment, tax or legal advice, any recommendation, or an offer to sell, or a solicitation of any offer to buy, an interest in any security. References to specific securities and their issuers or sectors are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities or gain exposure to such sectors.

    Each investor shall make his/her own appraisal of the tax and other financial merits of his/her investment.

    Sources

    This commentary may be based on or contain information, such as opinions, recommendations, estimates, price targets and valuations which emanate from: VanEck portfolio managers, analysts or representatives, publicly available information, information from other units or Companies of VanEck, or other named sources.

    To the extent this commentary is based on or contain information emerging from other sources (“Other Sources”) than VanEck (“External Information”), VanEck has deemed the Other Sources to be reliable but neither the VanEck companies, others associated or affiliated with said companies nor any other person, do guarantee the accuracy, adequacy or completeness of the External Information.

    Limitation of liability

    VanEck and its associated and affiliated companies assume no liability as regards to any investment, divestment or retention decision taken by the investor on the basis of this commentary. In no event will VanEck or other associated and affiliated companies be liable for direct, indirect or incidental, special or consequential damages resulting from the information in this publication or report.

    Risk information

    The risk of investing in certain financial instruments, is generally high, as their market value is exposed to a lot of different factors such as the operational and financial conditions of the relevant company, growth prospects, change in interest rates, the economic and political environment, foreign exchange rates, shifts in market sentiments etc. Where an investment or security is denominated in a different currency to the investor’s currency of reference, changes in rates of exchange may have an adverse effect on the value, price or income of or from that investment to the investor. Past performance is not a guide to future performance. Estimates of future performance are based on assumptions that may not be realized. When investing in individual shares, the investor may lose all or part of the investments. 

    Conflicts of interest

    VanEck, its affiliates or staff of VanEck companies, may perform services for, solicit business from, hold long or short positions in, or otherwise be interested in the investments (including derivatives) of any company mentioned in this commentary.

    To limit possible conflicts of interest and counter the abuse of inside knowledge, the representatives, portfolio managers and analysts of VanEck are subject to internal rules on sound ethical conduct, the management of inside information, handling of unpublished research material, contact with other units of VanEck and personal account dealing. The internal rules have been prepared in accordance with applicable legislation and relevant industry standards. The object of the internal rules is for example to ensure that no analyst will abuse or cause others to abuse confidential information. This commentary has been prepared following the VanEck Conflict of Interest Policy. 

    Distribution restriction

    This commentary is not intended for, and must not be distributed to private customers.

    No part of this material may be reproduced in full or in part in any form, or referred to in any other publication without express written permission of VanEck. ©2019, VanEck.

    Index Descriptions

    All indices named in the commentary are unmanaged indices and include the reinvestment of all dividends, but do not reflect the payment of transaction costs, advisory fees or expenses that are associated with an investment in the Fund. An index’s performance is not illustrative of the Fund’s performance. Indices are not securities in which investments can be made.

    General

    Austria: Paying Agent -- Erste Bank der oesterreichischen Sparkassen AG
    UK: Facilities Agent -- Computershare Investor Services PLC
    Germany: Information Agent -- VanEck (Europe) GmbH
    Spain: Designated Distributor -- Allfunds Bank S.A.
    Sweden: Paying Agent -- SEB Merchant Banking


  • Important Disclosure

    For informational and advertising purposes only.

    This information originates from VanEck (Europe) GmbH which has been appointed as distributor of VanEck products in Europe by the Management Company VanEck Asset Management B.V., incorporated under Dutch law and registered with the Dutch Authority for the Financial Markets (AFM). VanEck (Europe) GmbH with registered address at Kreuznacher Str. 30, 60486 Frankfurt, Germany, is a financial services provider regulated by the Federal Financial Supervisory Authority in Germany (BaFin). The information is intended only to provide general and preliminary information to investors and shall not be construed as investment, legal or tax advice. VanEck (Europe) GmbH and its associated and affiliated companies (together “VanEck”) assume no liability with regards to any investment, divestment or retention decision taken by the investor on the basis of this information. The views and opinions expressed are those of the author(s) but not necessarily those of VanEck. Opinions are current as of the publication date and are subject to change with market conditions. Certain statements contained herein may constitute projections, forecasts and other forward looking statements, which do not reflect actual results. Information provided by third party sources are believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. All indices mentioned are measures of common market sectors and performance. It is not possible to invest directly in an index.

    All performance information is historical and is no guarantee of future results. Investing is subject to risk, including the possible loss of principal. You must read the Prospectus and KIID before investing.

    No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission of VanEck.

    © VanEck (Europe) GmbH