The pace of new exchange traded funds launches in 2021 eclipsed an annual record and did so with roughly two months left in the year.
That’s good from the perspective of choice and implies demand for ETFs is robust (it is), but it means advisors and investors have a lot of new ideas to consider, and paring the field down can be difficult. For those looking for tactical sector ideas, the Goldman Sachs Future Real Estate and Infrastructure Equity ETF (GREI) is a practical idea to consider.
GREI, which is just over a month old, could rapidly accrue momentum and not simply because the real estate sector is performing well this year, but because analysts expect that condition to persist into 2022.
“Blended (funds from operations) growth for Real Estate has been consistently improving in recent months, climbing into double-digit territory for the first time in four years,” chief investment strategist Brian Belski said in a note to clients. “On a relative basis, FFO growth looks to have troughed, while NTM growth forecasts continue to accelerate vs. the market rate.”
FFO is one of the most important metrics in assessing the health and value of real estate investment trusts (REITs). Due to the fact that GREI is actively managed, it can allocate to strong FFO names while avoiding those encountering FFO headwinds.
“Revisions have also been pretty strong as the breadth of upward FY1 & FY2 FFO revisions have held above 70% for seven straight months, setting up a solid backdrop for growth heading into 2022,” Belski adds. “Dividend growth, which represents a key attribute for Real Estate, has shown clear signs of improvement recently, but at the same time, still has a way to go to reach its pre-pandemic level.”
While expectations are in place that the Federal Reserve will raise interest rates next year, perhaps multiple times, that doesn’t have to be a death knell for real estate stocks and GREI avoids some of that risk by allocating to fresher, growthier corners of the sector.
“In addition, historical price action in the sector has typically been more sensitive to the economy than other yield proxies, which should help performance next year with US economic growth expected to remain above-trend,” adds BMO Capital Markets.
For more news, information, and strategy, visit the Future ETFs 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.