Commodities remain the red-ink leader in the trailing one-year return column too. Indeed, DJP is now lower by more than a third for the 12 months through last Friday (Nov. 20). That’s a long way from the one-year performance leader: US REITs (VNQ), which is ahead by 4.7% on a total-return basis.
The prospect of rising interest rates in the US—the Fed is currently expected to start squeezing monetary policy next month—is considered a negative for the relatively high-yielding REIT sector. But as the FT reports, some real estate executives say the outlook for higher interest rates may not be as troubling as some analysts expect. Property-investor Brookfield Asset Management, for instance, recently explained in a letter to shareholders:
“We have been running our business with the expectation that interest rates will increase, particularly in the United States; in fact, we welcome this. Interest rates will rise because the economy is improving and that is positive for business,” Brookfield Asset Management told its shareholders at the end of the second quarter.
“Returns may be slightly less going forward, but cap rates (the inverse of the return) have been stubbornly high relative to interest rates for one specific reason . . . that everyone knew interest rates were going up.” At the same time though, the letter noted, “we have been net sellers of assets in the US, given the robust amounts of capital available to investors”.