REITs

The REIT managers are on the nose, they know this, and are putting out research to try and reassure everyone that today is not like the GFC (a bad prior period for REITs).

So, with that objective in mind, it’s still worth looking through the table from Resolution (one of our preferred active G-REIT managers) below.

On almost every metric, REITs are cheaper, less geared, higher yielding, termed out (i.e. better debt tenors) with less supply, and better pre-conditions (not coming off a period of hot speculative money flows).

It’s worth keeping in mind. We’ve got REITs on in the diversified portfolios, and we added ~300bps to our positions over the last couple years (when REITs dropped some 30% on average).

Usually, modest DAA tilts and tweaks like that add value (an entire asset class falls a lot, so you buy some predicated on the idea that over time, well-located bricks and mortar will be of use to someone somewhere), in this case, we are still waiting, and given where yields are going in the short run (higher) will probably have to wait a while longer.

That’s okay, being patient is part and parcel of investing.

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