Looking at equity market, one theme this year is that the U.S. has been outperforming global markets, both developed international and emerging markets.1 However, looking within the U.S., real estate has performed particularly well. Through November 10, 2014:
• The S&P 500 Index (U.S. Equities) is up 12.2%.
• The Dow Jones U.S. Select Real Estate Securities Index (U.S. Real Estate) is up more than 2x that: 27.9%.
But what about outside of U.S. markets? Equities vs. Real Estate: U.S. & Ex- U.S. Markets
For definitions of terms and Indexes in the chart, visit our glossary.
• Global ex-U.S. Real Estate Outperforms Global ex-U.S. Equities: Just as we observed in the U.S., real estate also outperformed broad equity markets in the global ex-U.S. space.
– Australia, Hong Kong and Singapore exposures within Global ex-U.S. Real Estate are notable. Each averaged a double-digit weight for the year-to-date period, and each delivered strongly positive performance.
– Negative performance at the country level over this period was limited for Global ex-U.S. Real Estate—the only markets that were negative with exposures greater than 1.0% were Japan, China and Brazil. In the case of Brazil and Japan, significant portions of those returns were currency-driven.
So, Is Real Estate Still Attractive?
Both within and outside of the U.S., real estate outperformed broader markets. However, behind Global ex-U.S. Real Estate is an important rebalancing methodology that brings constituent weights back toward a measure of relative value—something that is especially important after periods of strong performance. This occurs once per year and is based on a screening run on September 30.
U.S. Real Estate does not rebalance back toward a measure of relative value.