The real estate sector is comprised of a lengthy list of industry groups, and they don’t all perform in unison, highlighting the benefits of active funds like the ALPS Active REIT ETF (NASDAQ: REIT).
When the real estate sector struggled last year due to the coronavirus pandemic, it was obvious the pandemic was affecting some industries more than others. Conversely, the sector is rebounding this year. Either way, REIT’s active approach can be advantageous because it’s not confined to index rules.
Due to its active style, REIT is better-positioned to capitalize on emerging real estate trends, of which there are several.
“The first of these trends is digitalisation. Bolstered by the growth of the online world and the explosion of internet shopping – particularly during the pandemic,” reports Investment Week. “Advanced and automated logistics centres look set to continue to prosper as businesses battle to provide online shoppers with a greater variety of goods and faster delivery times.”
As an active ETF, REIT can, as the managers see fit, up exposure to industrial REITs and overweight that group relative to rival passive funds.
Healthcare real estate investment trusts, which are found to varying degrees in index-based real estate funds, are another segment with long-term promise – an important consideration due to rapidly aging populations in developed markets.
“With this comes an inevitable increase in demand for GP surgeries and care homes, the value of and need for which were thrown into sharp relief during the pandemic,” according to Investment Week. “The long-term nature of real estate in the sector means that the income is, for the most part, highly predictable and dependable.”
REIT can even respond to geographic considerations. For example, there often are times when commercial real estate markets in the Midwest or South are more vibrant than their coastal counterparts, and vice versa.
Other REIT ETFs include the Schwab US REIT ETF (NYSEArca: SCHH) and the Pacer Benchmark Data & Infrastructure Real Estate SCTR ETF (SRVR).
For more on cornerstone strategies, visit our ETF Building Blocks Channel.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.