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Investors Are Piling Into This Hot Real Estate ETF
FYI: Too much vanilla is growing tiresome for yield-hungry investors. So they’re trying out more exotic flavors -- including a particularly hot real estate exchange traded fund.
The iShares U.S. Real Estate ETF, ticker IYR, took in $425 million last week, the largest weekly inflow in almost a year. The fund hadn’t seen more than $400 million since last December. Regards, Ted
Comparing 1 YR performance of IYR to a Real Estate Income Fund, such as FRIFX, reveals about a (5.7%) upside difference in performance for IYR.
Real estate stock appreciation comes with a fair amount of volatility. Be prepared for that kind of a ride. If you are looking primarily for income buy a fund like FRIFX , but even FRIFX lost 40% of it's value in March of 2009.
Since you are more familiar with this fund (FRIFX), do you ever use it as a indicator of the broader Real Estate index (I'll use VGSIX...the index) . It seems FRIFX might serve as good indicator of whether the RE Index is over or under performing. Comparison over a 1 Year timeframe: VGSIX is over pereforming slightly (2%), but with substantially more volatility:
Over three years the two are in a dead heat with only two short moments where the index out performed:
Finally, a comparison of FRIFX to PIMIX (PONDX, PONAX, PONCX, Etc.) over the last 8 years. Obviously the March 2009 downturn was tough on FRIFX where it lost 40% while PIMIX only lost 5%.
Hi @bee As we know the markets are sometimes silly, funny and most times difficult to attempt to find proper paths for our money (adjusted for one's risk style). Since the market melt, anticipated and accepted gains have been found in many areas. This is not rocket science (at least in hind sight). ........ was one helluva "value" market in March, 2009, yes?.
The following graph is one that I have constructed/viewed previous, is of interest; at least to me, as how areas have changed here and there. This graph are funds I have selected as long term real estate active managed funds for a "fair" comparison. I've also included SPY. In particular for me, is that the time period for this chart (Sept. 2008 to date) shows very favorable for total return of FRIFX against the other funds, including SPY. However, if one moves the "left" slider adjustment (on the day bar, showing 2,326 days) all the way left to 2003; one will see how different the return of FRIFX was from 2003-early 2009 was during this period and also, overall from 2003 to date showing FRIFX got its butt kicked by other real estate funds. Those who have held the other RE funds since or before the 2003 date are still doing okay. So, what happened to the other fine managers of RE funds since March, 2009 vs lonely FRIFX? Are the managers having that much difficulty sorting and trying to find where in the world of American real estate they should be invested? Two very different periods of returns, eh? http://stockcharts.com/freecharts/perf.php?VGSIX,FRIFX,CSRSX,FRESX,SPY&n=2326&O=011000
FRIFX fund composition has been about 50/50 equity/bonds for as long as I can remember. Although much less showy than other RE funds, this fund just chugs along as of the past 9 years, not unlike PIMIX and other funds out there, of which I am not aware.
FRIFX remains a much different RE fund from its peers. I have not plowed through the holdings of the other funds charted here; but FRIFX has some of the same holdings as other funds, with the variance being the bond holdings. There is investment grade, mortgage and junk (a fairly big chunk) bonds. The only year FRIFX was #1 in the category is 2008. The average RE fund was down about -40% and FRIFX was down -31%. Generally, the fund is always in the last 10% of the category per M*. The current 30 day SEC yield is about 3.8%, average bond duration of 2.55 years and has an annualized 10 year return of 7.34%.
The fund is still about 10% of our total portfolio.
Lastly, a quick look chart which includes FREL. This chart only goes back to Feb. 2015, as FREL is quite new. IYR and FREL travel together at this time.
Well, anyway; I recall @Ted wondering why we weren't playing with the big dogs in the world of RE. The charts speak for themselves at this point in time. We'll see, eh? This time remains different, IMHO.
I didn't proofread this.....pick my write for errors or omissions.
@catch22, Thanks for the response and links. I like the dynamic visual effect "the 2326 day slider" feature provides the viewer. Cool tool.
What are your impressions of the impact rising rates will have on this fund and other RE funds that derive income from bonds or from REIT that pay dividends?
The Fidelity fund review page states,
Hold securities with a low asset-weighted average credit rating and a low sensitivity to interest rate changes as defined by the fund's effective duration, both according to Morningstar's rating system.
yet I worry about its almost 50% weighting to High Yield.
Where's @Junkster when you need him...probably kneeing up a High Yield mountain trail.
Another nod for High Yield:
high yield bonds have historically not only provided investors with solid returns during periods of rising interest rates, but have also dramatically out performed its investment grade counterpart. While we do not expect to see a rapid rise in rates (again see our article from last week for our take on rates), we do believe that the high yield bond market provides a compelling fixed income opportunity for those concerned about rising rates.
@PRESSmUP - you asked "...why do folks lean towards real estate funds versus individual REIT's?" If I had to guess it's probably for the same reason(s) they buy dividend funds rather than building their own stable of individual dividend players. Honestly I haven't a clue.
Per your question about rising rates and effects upon RE related, I will offer a chart and a few thoughts. You and all others must keep in mind that I have no formal training in this area. My self - issued and printed "School of Hard Knocks" diploma is placed upon the wall as a reminder about not getting sassy.
Knowing you enjoy fiddling/viewing this type of data (I do, too) I have used the same chart from the earlier post for selected RE funds, but have removed SPY and placed $UST30Y. So, keep in mind while viewing the chart that the turquoise line for the 30 year bond is "YIELD" and not price.
Wait, wait.....there's more, so be patient before clicking that chart link.
Notes: --- I'm leaving this chart at the 200 days default in the slider bar. This is automatic after entering tickers and clicking "GO". --- The dates just below the chart are 7 day periods. --- In this 200 days chart, one may discover 2 cross over periods immediately which reflect the change in the 30 day yield and the price changes of included RE funds. Period 1: = early March, 2017 and moving to the left, Period 2: = early November, 2016. You'll have to move the left bar of the slider to the left to get to November, 2016. --- Relative to these cross over periods, and to view others moving left on the chart to early years; left click and "hold" on the 200 days section and drag this days time frame. @bee etal, not unlike cross over "price" points in charts you have posted previous, just keep in mind the 30 year yield "when moving towards the top of the chart is an increase in yield" and not a price as is indicated with the RE funds. --- Cursor on any of the chart lines. Place the cursor upon a chart line, anywhere; and the price and date will display. This includes, for this chart; the yield and date for the 30 year Treasury. --- You may also "right click" on the 200 days slider section to display preset time frames which may then be selected/clicked upon. --- This chart is active and you may enter which ever tickers you want to examine. Save the site page in favorites or where or however to revisit and play with other tickers. NOTE: tickers less that 3 years old will not generally be found for display at this site; at least as a "free" user.
Short and quick answer appears, that yes; "long term" interest rates do cause reactions to real estate funds. Been a long, long day. I will do my best to revisit sometime tomorrow about other aspects of what these charts sometimes show to me and viewing with investment fundamentals and technicals in mind.
Hi @bee The last chart shows that RE funds do react to a change in yield of the 30 year bond and perhaps to the 10 year, too. So, are the active managed funds managers "twitching" to changes in interest rates; and if so, only from a technical standpoint? How much of any change in price for RE funds is triggered from just a few managers or some other large, unknown investor(s) sell/buy that trips the pricing of all equity within these funds? I have not checked recently, but I am sure there is a very large overlap of the same equity companies (the top 10 holdings) that are held by many RE funds. A large sell or buy from a few RE fund managers would automatically drive the prices down for other funds holding the same equity(s), yes? As to etf's in the RE space. Are their prices not driven by what are the results of the managed RE funds? Needless to say, the RE fund area is very complex..... --- interest rate sensitive --- type of fund holdings (storage units, old developed malls, etc.) --- fund management abilities and their LUCK of choices
For me, I attempt to do fundamental and technical processes. Nothing hard core for the most part; but to stay informed/observe interest rates and some implied trends in real estate sectors......a kinda, storage units are still being build in my part of Michigan; but retail malls everywhere are having problems. One could invest directly into the RE stocks, but I'm too short of time these days for this adventure. The technical side: This is where the charts help melt overall thinking into this area, as well as other investments. The relative strength and 50, 100 and 200 days movements. For the most part, these would have to have solid directions and indicators for a sell or buy. The longer this equity bull market runs, one may find it easier or harder to sell. This, to me; is based more on how long an investment has been in place. I really don't want to give up FRIFX at this time; but if the technicals started to show trouble with the numbers, than away it would travel. I have not stated much of value, IMHO. Have you a "feeling" about this sector; and/or observations?
The author estimates that $32 trillion of wealth (returns in excess of Treasury Bills) was created between 1926 and 2015 via the approximately 26,000 stocks that have appeared in the CRSP database during that time. Of these 26,000 stocks, only 86 of the top performing stocks (less than 0.33%), were collectively responsible for over half of the wealth creation. And the top 1,000 performing stocks, less than 4% of the total, accounted for all of the wealth creation. The other 96% only matched the return of the one-month Treasury Bill with many of them producing less.
Comments
Real estate stock appreciation comes with a fair amount of volatility. Be prepared for that kind of a ride. If you are looking primarily for income buy a fund like FRIFX , but even FRIFX lost 40% of it's value in March of 2009.
I presume you meant, FRIFX .
I suspect IYR cash flows may be more related to hedge funds and related groups "playing" with money in this sector.
Since you are more familiar with this fund (FRIFX), do you ever use it as a indicator of the broader Real Estate index (I'll use VGSIX...the index) . It seems FRIFX might serve as good indicator of whether the RE Index is over or under performing. Comparison over a 1 Year timeframe: VGSIX is over pereforming slightly (2%), but with substantially more volatility:
Over three years the two are in a dead heat with only two short moments where the index out performed:
Finally, a comparison of FRIFX to PIMIX (PONDX, PONAX, PONCX, Etc.) over the last 8 years. Obviously the March 2009 downturn was tough on FRIFX where it lost 40% while PIMIX only lost 5%.
As we know the markets are sometimes silly, funny and most times difficult to attempt to find proper paths for our money (adjusted for one's risk style). Since the market melt, anticipated and accepted gains have been found in many areas. This is not rocket science (at least in hind sight).
The following graph is one that I have constructed/viewed previous, is of interest; at least to me, as how areas have changed here and there. This graph are funds I have selected as long term real estate active managed funds for a "fair" comparison. I've also included SPY.
In particular for me, is that the time period for this chart (Sept. 2008 to date) shows very favorable for total return of FRIFX against the other funds, including SPY. However, if one moves the "left" slider adjustment (on the day bar, showing 2,326 days) all the way left to 2003; one will see how different the return of FRIFX was from 2003-early 2009 was during this period and also, overall from 2003 to date showing FRIFX got its butt kicked by other real estate funds. Those who have held the other RE funds since or before the 2003 date are still doing okay.
So, what happened to the other fine managers of RE funds since March, 2009 vs lonely FRIFX? Are the managers having that much difficulty sorting and trying to find where in the world of American real estate they should be invested? Two very different periods of returns, eh?
http://stockcharts.com/freecharts/perf.php?VGSIX,FRIFX,CSRSX,FRESX,SPY&n=2326&O=011000
FRIFX fund composition has been about 50/50 equity/bonds for as long as I can remember. Although much less showy than other RE funds, this fund just chugs along as of the past 9 years, not unlike PIMIX and other funds out there, of which I am not aware.
Composition: https://fundresearch.fidelity.com/mutual-funds/composition/316389865?type=o-NavBar
FRIFX remains a much different RE fund from its peers. I have not plowed through the holdings of the other funds charted here; but FRIFX has some of the same holdings as other funds, with the variance being the bond holdings. There is investment grade, mortgage and junk (a fairly big chunk) bonds.
The only year FRIFX was #1 in the category is 2008. The average RE fund was down about -40% and FRIFX was down -31%. Generally, the fund is always in the last 10% of the category per M*. The current 30 day SEC yield is about 3.8%, average bond duration of 2.55 years and has an annualized 10 year return of 7.34%.
The fund is still about 10% of our total portfolio.
Lastly, a quick look chart which includes FREL. This chart only goes back to Feb. 2015, as FREL is quite new. IYR and FREL travel together at this time.
http://stockcharts.com/freecharts/perf.php?FRIFX,FREL,IYR,SPY&n=709&O=011000
Well, anyway; I recall @Ted wondering why we weren't playing with the big dogs in the world of RE. The charts speak for themselves at this point in time. We'll see, eh?
This time remains different, IMHO.
I didn't proofread this.....pick my write for errors or omissions.
Take care,
Catch
Thanks for the response and links. I like the dynamic visual effect "the 2326 day slider" feature provides the viewer. Cool tool.
What are your impressions of the impact rising rates will have on this fund and other RE funds that derive income from bonds or from REIT that pay dividends?
The Fidelity fund review page states, yet I worry about its almost 50% weighting to High Yield.
Where's @Junkster when you need him...probably kneeing up a High Yield mountain trail.
Another nod for High Yield: https://seekingalpha.com/article/2499395-high-yield-in-a-rising-rate-environment-a-perspective-on-historical-performance
If I had to guess it's probably for the same reason(s) they buy dividend funds rather than building their own stable of individual dividend players. Honestly I haven't a clue.
Per your question about rising rates and effects upon RE related, I will offer a chart and a few thoughts. You and all others must keep in mind that I have no formal training in this area. My self - issued and printed "School of Hard Knocks" diploma is placed upon the wall as a reminder about not getting sassy.
Knowing you enjoy fiddling/viewing this type of data (I do, too) I have used the same chart from the earlier post for selected RE funds, but have removed SPY and placed $UST30Y. So, keep in mind while viewing the chart that the turquoise line for the 30 year bond is "YIELD" and not price.
Wait, wait.....there's more, so be patient before clicking that chart link.
Notes:
--- I'm leaving this chart at the 200 days default in the slider bar. This is automatic after entering tickers and clicking "GO".
--- The dates just below the chart are 7 day periods.
--- In this 200 days chart, one may discover 2 cross over periods immediately which reflect the change in the 30 day yield and the price changes of included RE funds. Period 1: = early March, 2017 and moving to the left, Period 2: = early November, 2016. You'll have to move the left bar of the slider to the left to get to November, 2016.
--- Relative to these cross over periods, and to view others moving left on the chart to early years; left click and "hold" on the 200 days section and drag this days time frame.
@bee etal, not unlike cross over "price" points in charts you have posted previous, just keep in mind the 30 year yield "when moving towards the top of the chart is an increase in yield" and not a price as is indicated with the RE funds.
--- Cursor on any of the chart lines. Place the cursor upon a chart line, anywhere; and the price and date will display. This includes, for this chart; the yield and date for the 30 year Treasury.
--- You may also "right click" on the 200 days slider section to display preset time frames which may then be selected/clicked upon.
--- This chart is active and you may enter which ever tickers you want to examine. Save the site page in favorites or where or however to revisit and play with other tickers.
NOTE: tickers less that 3 years old will not generally be found for display at this site; at least as a "free" user.
http://stockcharts.com/freecharts/perf.php?VGSIX,FRIFX,CSRSX,FRESX,$UST30Y&n=200&O=011000
Short and quick answer appears, that yes; "long term" interest rates do cause reactions to real estate funds.
Been a long, long day. I will do my best to revisit sometime tomorrow about other aspects of what these charts sometimes show to me and viewing with investment fundamentals and technicals in mind.
Good night,
Catch
The last chart shows that RE funds do react to a change in yield of the 30 year bond and perhaps to the 10 year, too.
So, are the active managed funds managers "twitching" to changes in interest rates; and if so, only from a technical standpoint?
How much of any change in price for RE funds is triggered from just a few managers or some other large, unknown investor(s) sell/buy that trips the pricing of all equity within these funds?
I have not checked recently, but I am sure there is a very large overlap of the same equity companies (the top 10 holdings) that are held by many RE funds. A large sell or buy from a few RE fund managers would automatically drive the prices down for other funds holding the same equity(s), yes?
As to etf's in the RE space. Are their prices not driven by what are the results of the managed RE funds?
Needless to say, the RE fund area is very complex.....
--- interest rate sensitive
--- type of fund holdings (storage units, old developed malls, etc.)
--- fund management abilities and their LUCK of choices
For me, I attempt to do fundamental and technical processes. Nothing hard core for the most part; but to stay informed/observe interest rates and some implied trends in real estate sectors......a kinda, storage units are still being build in my part of Michigan; but retail malls everywhere are having problems. One could invest directly into the RE stocks, but I'm too short of time these days for this adventure.
The technical side: This is where the charts help melt overall thinking into this area, as well as other investments. The relative strength and 50, 100 and 200 days movements. For the most part, these would have to have solid directions and indicators for a sell or buy. The longer this equity bull market runs, one may find it easier or harder to sell. This, to me; is based more on how long an investment has been in place. I really don't want to give up FRIFX at this time; but if the technicals started to show trouble with the numbers, than away it would travel.
I have not stated much of value, IMHO.
Have you a "feeling" about this sector; and/or observations?
Take care,
Catch
https://newsmax.com/Finance/GaryCarmell/Bessembinder-Fascinating-Skewed-Study/2017/04/24/id/786073/