The Goldman Sachs Future Real Estate and Infrastructure Equity ETF (GREI) is one of the new kids on the block in the world of real estate exchange traded funds, but it’s got the look of a well-timed addition to that fray.
Broadly speaking, the real estate sector is impressing this year, and some market observers remain bullish on the group. In fact, real estate is scoring well based on some quantitative factors highlighted by UBS.
“Our sector rotation model uses our Delta Quality, Free Cashflow Yield and Composite Momentum to rank individual securities. We then utilize the implied sector tilts to generate our sector allocations,” UBS analyst Paul Winter says in a recent report.
While GREI isn’t specifically mentioned in the report, the UBS model highlights real estate as a sector to overweight.
“We note that there are some sectors that the model seems to permanently underweight such as Energy, Health Care, Financials and Real Estate. In most cases this is due the low free Cashflow yields of these sectors,” adds Winter.
The newly minted GREI offers investors a compelling avenue for capitalizing on strength in the real estate sector. For starters, the fund is actively managed, helping it stand out in a corner of the ETF realm littered with passively managed products.
Active management could be a critical feature for GREI in 2022, as its managers can avoid real estate segments that remain vulnerable to coronavirus headwinds or those with histories of languishing in rising rate environments. Keep in mind that the Federal Reserve could raise interest rates multiple times next year.
Another point in favor of GREI is its emphasis on next-generation real estate concepts, many of which are under-represented in traditional funds in this category.
Something else to consider with the Goldman Sachs fund is that it’s not a dedicated real estate ETF. It has exposures (some of which are very modest) to seven other sectors. Those include energy, industrials, and materials — all of which are rated “overweight” by the UBS quantitative model.
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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.