REITs have been the top-performing asset class in eight of the past 22 years, sending investors searching for the best real estate ETF this year.
With REITs currently trading at substantial discounts, long-term investors identified a compelling investment opportunity. Actively managed funds were of particular interest in 2022, as investors saw the strengths in active managers’ ability to capture market dislocations.
The top-read real estate ETF stories this year focused on rising home prices and rents, as well as public REITs’ historical outperformance over private real estate.
The Invesco Active U.S. Real Estate ETF (PSR) gained attention with its 18% growth in the past year, as of the publication of “This REIT ETF Grows as Home Prices Rise.”
Real estate has historically been embraced because it can deliver excess returns during bull markets and has a low correlation with traditional stock and bond investments. REITs might appeal to investors seeking current income, as these trusts must distribute at least 90% of their income to investors.
REITs also offer an efficient way for investors to gain indirect exposure to real estate prices, as opposed to direct exposure gained through ownership of a residential property.
Rent prices rose in 2022 as would-be home buyers were priced out of the housing market and forced back into rentals, strengthening residential real estate exchange traded funds.
Rents increased nearly 13% for year-to-date through July, the highest annual advance in five years as tracked by real-estate data company Yardi Matrix.
Even for investors who have significant resources and a higher tolerance for illiquidity, listed real estate – found in the Virtus Duff & Phelps Global Real Estate Securities Fund (VGISX) – can offer benefits beyond those found in private equity real estate.
For more than three decades, REITs have provided an attractive intersection of benefits to those seeking commercial real estate investments. A performance advantage over private equity real estate (PERE) funds, now documented by rigorous academic research, simply underscores the opportunity for all investors, according to Virtus.
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