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Symbol Fund Name 1 Wk 13 Wk YTD 1 Yr 3 Yr (Annualized) 5 Yr (Annualized) 10 Yr (Annualized) PETDX PIMCO:RE Rl Rtn;D -0.44% -6.40% -1.99% 5.58% 21.35% 11.13% -- FRIFX Fidelity Real Est Inc -0.25% -0.03% 4.94% 15.36% 12.70% 10.35% 7.61%
Why is Pimco Real estate (PETDX) fund performing so poorly YTD vs other real estate REIT in its peer class i.e. FRIFX prinx
It's exceptionally more volatile than average REIT funds and often seems to perform as if it's a leveraged (which it may be to some degree, given all the various derivatives) real estate fund. It's also an index fund, not actively managed. If real estate does well, it does very well. If real estate doesn't do well (such as the last few weeks, although there has been a definite REIT rebound) it will really not do well. Personally, I think more conservative choices (such as Fidelity's Real Estate Income fund, I forget the symbol) are far better and more comfortable long-term holdings.
Listen to Scott. He's right. Through March anyway, PIMCO Real Estate is best in class, even an aspiring great owl. But it's a high risk group with extreme volatility - PETAX drew down 70% in 2009. Will revisit in July:
It's PIMCO Real Estate Real Return. The difference is more than semantic. All of the PIMCO Real Return funds are designed as inflation hedges, investing in TIPs and another asset class that might benefit from rising inflation (real estate). Inflation is effectively zero (0.1% in May, according to this morning's news). TIPs are in the red for the year (down 5% while REITs are up 6) and badly lag real estate over the past three years (up 4.5% while REITs are up 14). As a result, a combination of TIPs and REITs trail REITs alone.
The same problem is hindering other PIMCO funds as well.
Reply to @Charles: With only a three track record BREFX may need a little more time to prove it's a consistent long term performer, but over the last three years it seems worth keeping an eye on.
Reply to @Charles: That is always the question with a portfolio hedge, I guess. You can always keep 5% of your long-term money in (say) a bear market fund, bleeding annually until it's suddenly brilliant, or you can make a timed purchase just at the moment of need.
Part of the reason I have funds like FPA Crescent (FPACX) or Northern Global Tactical Asset Allocation (BBALX) is that I'm not very good at either discipline, so I'm willing to delegate the hedging part to the professionals. I might, for the same reason, consider a position in T. Rowe Price's new Global Allocation fund (RPGAX) but I need to learn more before deciding.
Reply to @David_Snowball: right on, David. they have all their collateral (from commodities and other derivatives) invested in TIPs. worked wonders for them in prior years, not only generating highter yield than cash, but also some capital appreciation as the TSY rates collapsed. Now, those same TIPs contribute to underperformance.
There is a fairly large breed of these newer (2006-2008) funds which offer 'real return' in their name -- brought about when inflation reared its ugly head. They all came crashing down recently as TIPs and commodities collapsed.
It is still a category worth considering in someone's portfolio, but with the open eyes, and right percentage.
Comments
It's PIMCO Real Estate Real Return. The difference is more than semantic. All of the PIMCO Real Return funds are designed as inflation hedges, investing in TIPs and another asset class that might benefit from rising inflation (real estate). Inflation is effectively zero (0.1% in May, according to this morning's news). TIPs are in the red for the year (down 5% while REITs are up 6) and badly lag real estate over the past three years (up 4.5% while REITs are up 14). As a result, a combination of TIPs and REITs trail REITs alone.
The same problem is hindering other PIMCO funds as well.
For what it's worth,
David
With only a three track record BREFX may need a little more time to prove it's a consistent long term performer, but over the last three years it seems worth keeping an eye on.
Part of the reason I have funds like FPA Crescent (FPACX) or Northern Global Tactical Asset Allocation (BBALX) is that I'm not very good at either discipline, so I'm willing to delegate the hedging part to the professionals. I might, for the same reason, consider a position in T. Rowe Price's new Global Allocation fund (RPGAX) but I need to learn more before deciding.
David
There is a fairly large breed of these newer (2006-2008) funds which offer 'real return' in their name -- brought about when inflation reared its ugly head. They all came crashing down recently as TIPs and commodities collapsed.
It is still a category worth considering in someone's portfolio, but with the open eyes, and right percentage.