Thanks to Covid-19, the world of real estate is undergoing its own transformation as more individuals use their homes as their personal live-work spaces. As such, sovereign funds, proverbial whales when it comes to real estate ownership, are re-thinking their real estate investments.
“Real estate is still a big part of sovereign wealth fund portfolios and will continue to be so,” said Diego López, managing director of Global SWF and a former sovereign wealth fund adviser at PwC.
“What COVID has accelerated is the sophistication of SWFs trying to build diversification and resilience into their portfolio — and hence looking for other asset classes and industries.”
In addition, the way funds are choosing investments is changing. Per a St Louis Today article, sovereign wealth funds “invested $4.4 billion in the sector in the first seven months of 2020, 65% down from the same period a year ago, according to previously unpublished data from Global SWF, an industry data specialist.”
Furthermore, the “nature of property investments is also shifting, with funds increasingly investing in logistics space, such as warehousing, amid a boom in online commerce during the pandemic, while cutting back on deals for offices and retail buildings.”
Exchange-traded fund (ETF) investors who want to take advantage of the forthcoming changes in real estate can look at the FlexShares Global Quality Real Estate Index Fund (GQRE). The fund seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the Northern Trust Global Quality Real Estate IndexSM. The index is designed to reflect the performance of a selection of companies that, in aggregate, possess greater exposure to quality, value, and momentum factors relative to the Northern Trust Global Real Estate Index.
Another fund to check out is the Xtrackers International Real Estate ETF (HAUZ), which seeks investment results that correspond generally to the performance of the iSTOXX Developed and Emerging Markets ex USA PK VN Real Estate Index. iSTOXX Developed and Emerging Markets ex USA PK VN Real Estate Index is a free-float capitalization-weighted index that provides exposure to publicly traded real estate securities in countries outside the United States, Pakistan, and Vietnam.
One more fund to look at is the Vanguard Real Estate ETF (NYSEArca: VNQ). VNQ seeks to provide a high level of income and moderate long-term capital appreciation by tracking the performance of the MSCI US Investable Market Real Estate 25/50 Index that measures the performance of publicly traded equity REITs and other real estate-related investments.
For more market trends, visit the ETF Trends.