Expansion of Data Centers Can Help Propel REIT ETF
This article was originally published on ETFTrends.com.
As the world gets increasingly reliant on digital technology, the buildout of infrastructure will be a necessity via data centers. That growth is boosting stocks like Equinix and ETFs focused on real estate investment trusts like the ALPS Active REIT ETF (REIT).
Equinix constitutes 10% of REIT's allocation. Therefore, the real estate company will have a tangible impact on the performance of the fund. With the company's focus on data centers, its growth trajectory is promising. Equinix's reach is global, with its recent expansion into the continent of Africa.
"Nasdaq-listed Equinix Inc. will invest $390 million in Africa over the next five years building data centers and expanding current operations in South Africa and the west of the continent," reported Bloomberg.
Critical Expansion Juncture
Adding digital infrastructure to Africa will be a critical juncture in expanding the use of internet technology to the masses. Developed countries are accustomed to services like internet access. But certain parts of Africa are still trying to catch up to the digital age. So the buildout of data centers by companies like Equinix will be of great assistance.
"The California-based data center operator is also pursuing opportunities in East Africa and will potentially spend more to build or acquire there, recently appointed managing director for South Africa, Sandile Dube, said in an interview," the report added.
The global reach of Equinix can already be felt with its data centers in the Asia Pacific. These include its data centers located in countries like Australia, China, Hong Kong, Japan, Korea, Singapore and now Malaysia, India and Indonesia, as reported by CDO Trends.
With holdings like Equinix, REIT can capture opportunities in the real estate market outside the realm of residential and commercial real estate. This approach to nuanced corners of the real estate market will make the fund flexible in a challenging macroeconomic environment for residential and commercial real estate.
Digging Into the REIT ETF
Of course, one of the attractive features of REITs is their fixed income opportunities. REIT has a 30-day SEC yield of 3.61% (as of January 31). And this ETF can help supplement a fixed income investor's portfolio. It can also help get potential price appreciation from the real estate market.
REIT comprises common equity securities of U.S. REITs. It also includes the common equity of U.S. real estate operating companies not structured as REITs, preferred equity of U.S. REITs, and real estate operating companies. The active strategy component lets experienced portfolio managers handpick the fund’s holdings. This maintains necessary flexibility in the current market where holdings can be adjusted when interest rate decisions by the Federal Reserve warrant a change.
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