Under the Hood of 5-Star REITs Fund VGISX | ETF Trends

The real estate sector’s qualities have long been recognized as an inflation hedge, making it a preferred investment during periods of rising interest rates and inflation.

There are two attractive attributes real estate has as hedges against inflation. First, there’s the ability to raise rents and, in turn, cash flows; and second, the increase in replacement costs of the real estate itself, according to Virtus.

During historical periods of rising interest rates and medium-to-high inflation, REITs have generated positive total returns and outperformed equities. Since Nareit began tracking data for REITs in 1972, REITs have delivered attractive returns during periods of low, moderate, and high inflation, 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.

VGISX seeks attractive long-term returns by providing global real estate securities exposure, emphasizing companies with revenues driven by recurring rental income. The highly experienced portfolio team applies a disciplined, bottom-up investment process, utilizing both qualitative and quantitative factors, focusing on high-quality commercial real estate owners/operators.

Investors need to understand what they’re investing in. The top 10 holdings in VGISX, as of March 31, include: Prologis Inc (6.38% weight); Sun Communities Inc (3.21%); Welltower Inc (3.17%); Simon Property Group (2.98%); AvalonBay Communities Inc (2.96%), Mid-America Apartment Communities Inc (2.95%); Extra Space Storage Inc (2.83%), Mitsubishi Estate Co Ltd (2.76%); Duke Realty Corp (2.67%); and Equinix Inc (2.64%).

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