The market is presenting an opportunity today. Real estate investment trusts have become a source of yield generation for income seekers, but investors should not paint the real estate sector with a broad brush.
In the upcoming webcast, How Real Estate is Positioned for Today’s Markets and Economy, Kevin Davis, Chief Growth Officer, Vident Financial; and Jerry Bowyer, Chief Economist, Vident Financial, will consider the factors that go into real estate performance and outline an investment methodology that targets specific factors to enhance real estate exposure in today’s volatile market.
ETF investors who are interested in the real estate sector may consider something like the U.S. Diversified Real Estate ETF (NYSE Arca: PPTY) to gain diversified exposure to real estate investment trusts and the yield opportunities that this segment of the market presents.
PPTY’s portfolio is constructed based on the actual properties held by each company in the investment universe. The smart beta index-based ETF screens for four primary factors when investing in real estate, including location, property type, leverage, and governance.
Location can affect the value of a property and is a crucial driver of real estate performance. Stable targets are used to diversify geographic exposure while favoring dynamic, high-growth locations.
Differences between property types also produce varying results. The fund’s fixed allocations seek to ensure diversification and balance.
Leverage and governance factors are further included to reduce exposure to higher-risk companies. The responsible use of leverage can potentially enhance returns, but taking on too much debt is risky, so the portfolio includes companies with prudent leverage. Additionally, firms with significant governance risks like external management are excluded from the portfolio to diminish further unknowns.
Financial advisors who are interested in learning more about real estate strategies can register for the Thursday, March 19, webcast here.