The federal funds rate is expected to jump again for the second time this year, bringing interest rates higher across the board.
The FOMC today kicked off its two-day May policy meeting, in which committee members are expected to raise the target range of the federal funds rate by 50 basis points to 75–100 basis points in an effort to tame decades-high inflation.
Real estate, in its various forms, has historically provided a hedge against inflation and rising interest rates. Since 1972, REITs have delivered attractive returns in a wide range of inflationary environments, with the ability to offset increased costs by pushing rents higher as demand for space grows, according to Virtus.
Adding exposure to a diverse array of global real estate markets with the Virtus Duff & Phelps Global Real Estate Securities Fund (VGISX) offers lower correlations and lower beta to traditional stocks, and, as part of a balanced portfolio, has historically lowered risk and enhanced returns, according to Virtus.
By focusing on rental property companies with contractual revenues, the team managing VGISX has amassed a compelling track record of risk-adjusted performance driven by actively managed stock selection.
Active managers have the flexibility to benefit from market dislocations, making active management a key approach to gaining exposure to real estate.
According to Virtus, research coverage of the larger, global opportunity set of REITs is less consistent, and the space has not been inundated with passive flows. With a wide array of sectors and securities, across a varied set of countries at different stages of their business cycle, active managers have an expanded opportunity set with which they differentiate themselves from the passive pack.
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