Despite recent weakness in U.S. equities and a sudden surge of asset inflows in conservative short and medium duration U.S. Treasury bond ETFs, REIT based equity funds are still pulling in assets.
Specifically, Vanguard REIT (VNQ - News) and iShares Dow Jones U.S. Real Estate (IYR - News) have collectively reeled in more than $350 million in recent sessions via creation activity. [REIT ETFs Back in Favor]
We believe there are two reasons for this activity despite the broader softness in equities. First, REITs tend to deliver appealing and steady dividends to investors whom are seeking yield.
In some cases, U.S. based REIT ETF products are yielding north of 3%. And with iShares Barclays 20+ Year Treasury Bond (TLT - News) running to recent highs on a 9.5% surge since mid-March and with yields on treasuries falling drastically once more (testing low levels not seen in decades), it’s no wonder that investors are looking for greater yield opportunities somewhere.
Secondly, REITs have demonstrated impressive relative performance to the broad market, as VNQ and IYR for instance are up 12.63% and 13.16% respectively against the S&P 500’s gain of 8.75% year to date.
There are a number of REIT based ETFs that focus on broadly U.S. Real Estate, including VNQ, IYR, iShares Cohen & Steers Realty Majors (ICF - News), SPDR Dow Jones REIT (RWR - News), First Trust S&P REIT (FRI - News), Schwab U.S. REIT (SCHH - News), IndexIQ U.S. Real Estate Small Cap (ROOF - News), PowerShares Active U.S. Real Estate (PSR - News), Guggenheim Wilshire U.S. REIT (WREI - News), and FocusShares Morningstar Real Estate (FRL - News).