In a low-yield environment, investors often lean on sectors with traditions of delivering the income goods. Real estate is one, but following the group’s coronavirus swoon, active management could better-serve investors in this arena.
Enter the ALPS Active REIT ETF (NASDAQ: REIT). Benefits of active management with real estate investment trusts (REITs) include avoiding potential dividend cutters and corners of the sector that are vulnerable to underperforming the broader sector.
“It isn’t that REITs are out of the woods yet—a pickup in Covid cases that trigger renewed lockdowns would almost certainly send them into a swoon, while it remains unclear how many people will want to return to the office or shop at the mall. But those risks are growing smaller by the day, and a lot of that bad news already is reflected in the share price,” reports Ben Levisohn for Barron’s.
The actively managed REIT is also levered to another prominent theme currently permeating financial markets: increasing levels of COVID-19 vaccinations.
As an actively managed fund, REIT can pivot to relevant corners of the real estate sector, such as hotel and retail REITs. Conversely, REIT can leverage that active management to increase exposure to some of the more durable real estate segments, such as healthcare, industrial, and technology REITs.
“Global travel restrictions and consumers canceling vacation plans have caused massive occupancy declines for the hotel industry. Malls across the country were closed for several months, and many retailers are struggling as consumers have shifted many of their shopping habits online. And though the industrial and self-storage sectors declined initially, they have outperformed the broader real estate sector since the start of 2020. These sectors are outperforming, as they should be relatively insulated from the worst effects of the virus on the global economy,” according to Morningstar research.
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.