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.

Reprints Discuss this story
We welcome your thoughts. Please allow time for your contribution to be approved and posted. Thank you.

Most Recent Videos

Video Library ››