REITs: As Good as Gold?

Morningstar shows that some real estate-funds are now on par and even ahead of gold

While it’s true that gold is topping $1,340 an ounce and housing sales remain weak, some real-estate funds are outperforming their metal-based rivals.

REITs outperformed the broader U.S. equity markets by a five-to-one ratio in the first three quarters of 2010, according to the National Association of Real Estate Investment Trusts on Monday.

The FTSE NAREIT Equity REIT Index delivered a 19.10% total return and the FTSE NAREIT All REITs Index delivered an 18.5% total return for the period, compared to 3.89% for the S&P 500.

This means the sector’s news is as good as gold: The iShares Dow Jones U.S. Real Estate ETF (IYR) is matching gold’s returns for the year through Monday of 19.9%, and that puts its returns about 16.5% ahead of the S&P 500’s performance.

Plus, the iShares FTSE NAREIT Residential Plus Capped Index (REZ) outperformed the SPDR Gold Shares ETF (GLD) for the year to date as of Monday. REZ is up 25% year to date.

And the iShares Cohen & Steers Realty Majors Index ETF (ICF) is posting returns topping those of GLD – 22% for the year through Monday, says Morningstar.  

The iShares Silver Trust (SLV), however, outpaces both real-estate and gold ETFs with a year-to-date return of more than 30%.

In the fund universe, the PIMCO Real Estate Real Return Strategy Fund (PETAX) is beating both metals: Its performance year to date is 34.6%, according to Morningstar.

U.S. REITs have a total equity market capitalization of about $332 billion. They own about $500 billion of commercial real estate assets, or 10-15% of total institutionally owned commercial real estate, according to NAREIT.

The FTSE NAREIT All REIT Index includes 149 REITs, 133 of which are traded on NYSE.

REITs paid out roughly $13.5 billion in dividends in 2009 and have raised $32.6 billion in initial, debt and equity capital offerings in 2010.

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