Markets often see narratives obfuscate the facts on the ground, and 2024 has proved no exception. In this case, negative headlines surrounding real estate may be unnecessarily warding investors away from potential opportunities in REITs. An active REIT ETF, specifically, could provide one intriguing route into the space, as discussed on a panel during the recent SS&C ALPS Virtual Summit.
See more: Active ETFs Gain Share But Education Remains Key
The panel, hosted by VettaFi head of research Todd Rosenbluth, included comments from GSI Capital Advisors CIO Nick Tannura and SS&C ALPs Advisors Strategic Account Executive Consultant Karl Zeller. The panel, “Asking the REIT Questions,” looked at the real story in REITs and the potential of an active REIT ETF.
An Active REIT ETF for 2024
Tannura argued that market sentiment surrounding REITS has turned overly negative. While pandemic and post-pandemic changes like broad remote work have impacted downtowns, the majority of REIT offerings are doing well, he said.
“The majority of the market is in non core property types and niche property types which are doing very well,” Tannura said. “Fundamentals are solid in virtually all property types except for office.”
“The issues you hear and see and read about in terms of cost of capital and interest rates…are really not a huge problem for the REIT market. The companies are well managed and have leverage levels around 30%, which is certainly lower than average,” he added.
Valuations are also attractive on a historical basis, he noted. Looking at the long term metrics, he said, comparing how REITS trade vs. the S&P, REITS appear 25% cheaper than that historical metric.
A higher for longer rate regime is priced in, in Tannura’s view, as well. Areas like malls intriguingly, have actually done better than many may have expected. That owes in part to kind valuations.
SS&C ALPS Advisors offers the active REIT ETF REIT for curious investors. Per Tannura, an active approach can benefit a REIT strategy significantly.
“It works when you have an approach like we do … we’re bottom up, we’re fundamental, and we understand property as well as equity markets,” he said.
The ALPS Active REIT ETF (REIT ), charges 68 basis points (bps) for its approach. Having hit its three-year ETF milestone this February, it has returned 9.7% over one year per SS&C ALPS Advisors data. For investors looking for an active REIT ETF, it may offer one solid option for iincome and diversification this year.
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