The Goldman Sachs Future Real Estate and Infrastructure Equity ETF (GREI) is one of the newest additions to the real estate exchange traded fund landscape. Investors should remember that age is nothing but a number, and that’s particularly true with ETFs.
GREI isn’t your grandfather’s real estate fund. It’s not even your father’s, and that’s all right because GREI’s modern approach to real estate investing arrives at just the right time, and just as some market observers are bullish on select corners of the sector.
“The fallout from the COVID-19 pandemic continues to be a source of uncertainty for the Real Estate sector, but mass vaccinations and relaxed restrictions on public gatherings have reduced investor pessimism,” says Charles Schwab’s David Kastner. “Fiscal relief packages have staved off massive retail lease defaults, but elevated residential delinquencies still pose risks—particularly after the Centers for Disease Control and Prevention (CDC)’s eviction moratorium expired in late August—though improvements in the job market could mitigate this risk.”
Indicating that it takes a modern approach to real estate investing, GREI largely avoids some of the real estate segments that were hindered by the pandemic. For example, the new Goldman Sachs ETF is significantly underweight on commercial office, residential, and retail real estate investment trusts (REITs) relative to older, passive competitors.
While the economy is on solid footing, there are still some potential trouble spots in the broader real estate group — areas that GREI mostly steers clear of, highlighting the benefits of active management.
“The outlook for office REITs is likely to be uncertain until it becomes clear whether there will be an enduring shift toward remote working—although the recent trend appears to be for most workers to eventually return to the office. Nevertheless, increases in office building inventories are likely to weigh on lease prices and potentially property valuations,” adds Kastner.
Importantly, GREI is more levered to the exciting growth corners of the real estate sector, such as data centers and other technology concepts. Many old guard funds in this category are still lightly allocated to these REITs, potentially putting a cap on future performance.
“Warehouse, data center and telecom towers are benefiting from technology and e-commerce trends,” concludes Kastner.
GREI has nearly $10 million in assets under management after less than a month on the market.
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.