Kremenstein, though, advised investors to evaluate the investments based on desired income level with a focus on volatility and duration to limit potential risks. Specifically, he pointed to short-term REIT ETFs as they have historically experienced less volatility during times of rising rates.
For example, the NuShares Short-Term REIT ETF (BATS: NURE) is comprised of real estate investment trusts that invest in residential or commercial real estate with a shorter-than-average lease duration than REITs investing in other sectors.
These types of shorter-term REITs may be a good way for income-minded investors access yield generation in a rising rate environment as short-term contracts allow businesses to more quickly reprice and adapt to changing market environments. Due to the REITs structure that allows the majority of revenue to be distributed as income to shareholders, businesses’ prudent reactions could translate to higher returns for investors. NURE shows a 3.78% distribution yield.
For more information on real estate investment trusts, visit our REITs category.