In anticipation of a September interest rate cut by the Federal Reserve, real estate equities and the related exchange traded funds have recently found some solid footing. Over the past month, the S&P Real Estate Select Sector Index is higher by 5%.
The real estate sector still has a long way to go to recapture low-rate glory and some assistance from the Fed is likely required, but recent price action in the space suggests some investors are increasingly comfortable betting on a rebound and that could signal opportunity with ETFs such as the ALPS Active REIT ETF (REIT).
Actively managed, REIT has outpaced the aforementioned S&P Real Estate Select Sector Index by about 80 basis points over the past month. That could be a sign that the marriage of active management and real estate investment trusts (REITs) could be fruitful going forward. It certainly confirms that REIT possesses some holdings-level advantages relative to passively managed peers.
REIT Lineup Stands Tall
REIT is home to 28 stocks and while that may be slightly smaller than the rosters of some passive competitors, a case can be made that REIT has a higher conviction lineup than many of its rivals. At the very least, its flexibility could be a benefit for investors to consider.
That flexibility includes stakes in some of the REITs that some analysts believe are best-positioned to lead a rebound in the sector – a group including Kilroy Realty (KRC). Kilroy owns commercial and mixed use properties in attractive markets such as Austin, Texas, California and Seattle.
“Kilroy’s management has been able to successfully time the boom in technological employment occurring in the largest metropolitan areas along the West Coast. The company’s strategy is to achieve long-term sustainable growth by developing and owning the highest-quality real estate in technology and life science market clusters,” noted Morningstar analyst Suryansh Sharma.
