With so much uncertainty looming in the markets, investors may be considering defensive plays to give them some cover entering the new year. Whether current income or exposure to the largest, low-vol cap firms, there are a variety of approaches available for the more cautious investors out there, but one to consider could be an active real estate ETF like the Avantis Real Estate ETF (AVRE).
REITs didn’t have the easiest of years in 2022, with the sharp spike in interest rates making it harder for REITs to add new debt. Overall, the rate hikes have seen real estate struggle versus the broader market for 2022.
However, demand for housing remains high, and residential REITs in particular could stand out. One firm that has been rocked by the up-and-down few years is Prologis, Inc. (PLD), which saw 97.7% occupancy as of the third quarter of 2022. Add in that the firm was able to up its rent on renewable leases by about 60% over the quarter and one can see a case for an investment in real estate therein.
AVRE, from American Century’s Avantis Investors brand, holds PLD at 6.6%, its largest weight. The strategy actively invests in real estate stocks around the world, including REITs and REIT-like companies in its index, the S&P Global REIT Index. The index considers a firm a real estate company if it derives at least 50% of its revenues from real estate-related work.
AVRE, which charges 17 basis points, has seen net inflows of $64 million over one month and $13.6 million over just the last five days, according to VettaFi, compared to $258 million over one year. The active real estate ETF launched just over one year ago, in September 2021, and currently holds $241 million in AUM.
Real estate is certainly in flux right now with the Fed still intent on raising rates. But real estate remains one of the options for defensively minded investors, and for those who think that REITs can still play a role, AVRE is one ETF that merits watching in the weeks and months ahead.
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