Get Real: Billions Set To Pour Into Real-Estate Investments

Ted

FYI: (This is a follow-up article)
A big change is coming in how stock indexes measure the market, one that's likely to push tens of billions of dollars into real-estate investments, according to estimates. All that cash could drive further gains for a group of stocks that's already done quite well since the financial crisis. Critics say it could also make an area of the market that they call overvalued even more so.

The deluge of cash is the result of a re-think by index providers about how they see the market's construction. The Standard & Poor's 500 and other indexes have long split the market into 10 main sectors, such as technology companies or utilities or industrials. After the market closes on Aug. 31, S&P Dow Jones Indices and MSCI will carve out real estate to become the 11th sector.
Regards,
Ted
http://bigstory.ap.org/article/ebe0d17e6ae747f89df70a400299c2bd/get-real-billions-set-pour-real-estate-investments

Crash

I suppose this is good news to those of us who are already in RE funds...

Old_Skeet

According to a recent Morningstar Instant Xray analysis (6/3) my portfolio holds about 6.1% in real estate while the 500 Index hold about 2.4%. This is about 2.5 times what the Index holds so, with this, I plan to do nothing as some of my funds might be buying (maybe some selling). Anyway, 6% to 9% is all I wish to hold in any of the minority sectors of materials, real estate, communication services and utilities; and, 9% to 12% in any of the majority sectors of consumer cyclical, financial services, energy, industrials, technology, consumer defensive and healthcare. Overall in the minority sectors I am holding a total of 28% which is more than double the 500 Index weightings with the balance being held in the majority sectors (72%). On average this computes to about a 7% weighting in each of the minority sectors and a 10% average weighting in each of the majority sectors.

PRESSmUP

Crash said:

I suppose this is good news to those of us who are already in RE funds...

You're probably right Crash. I think the February dip may have been the last good opportunity to add to existing positions for awhile.

Edmond

A couple of things:

Who are these investors that may rush their billions of $ into REITs --- and how is it, if they are interested in owning REITs, that they are uneducated/unfamiliar with REIT-dedicated ETFs such as VNQ or IYR...? (not to mention, any number of REIT-dedicated OEFs...)

When the ETF splits, might that not also create some selling pressure by investors who don't want the REIT exposure -- some of whom may already have such exposure via VNQ or IYR...?

PRESSmUP

Edmond, per Ted's link, it is perhaps active managers who may step into the REIT space to guard against being caught under-allocated in this newly created space. Only time will tell if this will unfold in this fashion.

Crash

Late last week, the 10-year sunk to under 1.7%. German 10-year was yielding some ridiculous number, like .0003. Given the tie between interest rates and mortgages and Real Estate, I suppose this does bode well---- even if the fundamentals are all out of kilter......In reply to @Old_Skeet, I'm holding 12.5% in Real Estate. It is a global spread, with almost all of it in TRGRX, but surely a bit in some of my other holdings. (M* X-Ray, just now.) Also heavy in Financials, Industrials and Health Care. (Oops! I'm the one always preaching to get the profit-motive OUT of healthcare! Ouch.)

Old_Skeet

Hi @ Crash,

Seems as though you have "doubled down" in real estate? Your position (12.5%) computes to better than five times what the Index currently holds (2.4%) and doubles what I hold. I wonder what your weightings are in each of the other minor sectors of materials, communication services and utilities?

Hey ... Is Xray currently working for you? It is not for me! And, has now been broken for about a week now. The said ... They might not even realize that it's not working (no system checks).