Global REITs (GREITs) provide an efficient, seamless, convenient, and liquid way to invest in companies that own properties across the globe. These properties include sectors that are not always available in the local market or in the private markets such as logistics, life science, self-storage, residential communities, and data centres.
They provide a tax-efficient means of distributing rental income to shareholders and having access to REITs globally means that a portfolio is diversified, not only geographically and through currency, but also through the various sectors that are available.
Why invest in REITs
REITs historically have delivered competitive total returns. This is based on high, steady dividend income and long-term capital appreciation.
Their comparatively low correlation with other asset classes also makes them an excellent portfolio diversifier that can help reduce overall portfolio risk and increase returns.
REITs have the following characteristics:
REITs have historically provided:
• Ability to buy/sell like other stocks, mutual funds, and ETFs.
• Opportunities for tactical asset allocation.
• Easy portfolio rebalancing.
• Low correlation with other stocks and bonds.
• Higher risk-adjusted returns.
• An investment in real, tangible assets.
It would be extremely difficult for REIT management to hide accounting irregularities for an extended period, as this would eventually affect their ability to pay out their required dividends.
Coupled with this is the fact that REITs are under inspection from analysts and underwriters that would soon pick up on any misnomers. REITs are publicly traded firms and therefore face a high degree of scrutiny. In the United States alone there are 30 firms that provide real estate equity research. REITs are not immune to scandals, but the structure of REITs reduce the probabilities of fraud significantly.
• Dividends & wealth accumulation.
• Regular income from rents.
• Reduced portfolio volatility.
• Total returns above the S&P 500 over the past 25 years.
• Higher returns than corporate bonds.
At Reitway Global, we have a specialized investment approach that revolves around Global Listed Property. With a niche strategy, we focus exclusively on this asset class, allowing us to develop high-conviction views that drive wealth-enhancing performance over the medium and long term.
As a property fund manager offering both active and passive investment products, our investment philosophy is crafted to cater to the diverse needs and preferences of our investors while aiming to generate long-term value and consistent returns. We recognize and appreciate the unique characteristics and benefits of both active and passive strategies, and we seamlessly integrate them into our investment approach.
We believe in maintaining a patient and persistent investment mindset, aligning with the inherent nature of real estate as a long-term asset class. By adopting this approach, we can potentially deliver attractive returns to our clients while mitigating unnecessary risks.
Our investment strategy combines comprehensive research, rigorous analysis, and an in-depth understanding of the global listed property market. We continuously monitor market trends, identify investment opportunities, and carefully manage our portfolios to optimize performance.
Overall, our investment approach combines the best of active and passive strategies, tailored to the distinct demands of the global listed property sector. With a patient and persistent approach, we aim to generate long-term value and consistent returns for our investors.
At Reitway Global, we employ distinct investment processes for our active and passive products, each tailored to optimize performance and align with specific investor objectives.
Active Management for Active Products: In managing our active investment products, we adopt a proactive approach to REIT investing. Our experienced team actively identifies and capitalizes on asset class and sector inefficiencies, continuously seeking out undervalued companies that possess high-quality assets. Through comprehensive research, rigorous analysis, and hands-on management, we strive to optimize portfolio performance and deliver superior risk-adjusted returns to our investors.
Index Tracking for Passive Products: For our passive investment products, we implement an index tracking approach. These products are designed to replicate the performance of a specific property index. To closely match the index's performance, we construct a portfolio that mirrors the index's composition and weighting. Our focus is on cost efficiency and minimizing tracking error, while ensuring investors gain exposure to broad market trends and overall performance.
Regardless of the investment strategy, we place a strong emphasis on thorough research and due diligence. Our portfolio management team conducts rigorous analysis to identify investment opportunities, evaluate property fundamentals, assess market trends, and gauge risk factors. By employing this comprehensive approach, we ensure that both active and passive investment products are grounded in robust data, market insights, and a deep understanding of the underlying assets.
Through these investment processes, we aim to provide our investors with a diversified range of products that align with their risk tolerance and investment goals.
A Real Estate Investment Trust (REIT) is a company that owns, and in most cases, manages income-producing commercial real estate such as offices, apartments, warehouses, hospitals, malls, hotels and in some instances, even timberlands. REIT shares are traded on major stock exchanges, including London, New York, and Sydney.
REITs were created by the US Congress in the 1960s to give average investors access to investments in large-scale, commercial properties through the purchase of equity.
A company that qualifies as a REIT is permitted to deduct dividends paid to its shareholders from its corporate taxable income. As a result, most REITs remit up to 100 percent of their taxable income to their shareholders, who then pay taxes on the dividends received as well as any capital gains. As with other business, excluding partnerships, a REIT cannot pass any tax losses through to its investors.
US Congress created REITs in 1960 to make investments in large-scale, income-producing real estate accessible to average investors. Congress decided that a way for average investors to invest in large-scale commercial properties was the same way they invest in other industries — through the purchase of equity.
In the same way shareholders benefit by owning stocks of other corporations, the stockholders of a REIT earn a pro-rata share of the economic benefits that are derived from the production of income through commercial real estate ownership. REITs offer distinct advantages for investors: portfolio diversification, strong and reliable dividends, liquidity, solid long-term performance and transparency.
To qualify for a REIT, a company has to:
There are three types of REITs, namely equity, mortgage and hybrid REITs.
Equity REITs mostly own and manage income-producing properties and operate them as part of their own portfolio. They engage in a number of real estate activities, including leasing, maintenance and development of real property and tenant services. Their revenues come principally from rentals generated by their properties.
Mortgage REITs loan money for mortgages to real estate owners, or buy existing mortgages or mortgage-backed securities. They generate revenues through the interest earned on mortgage loans and for the most part, extend mortgage credit on existing properties only.
Hybrid REITs as the name suggests, are a combination of both equity and mortgage REITs and invest in both properties and mortgages.
REITs offer investors the following significant benefits:
There are currently 28 US REIT sectors and sub-sectors. Most REITs specialise in a single property sector, with diversified REITs investing in more than one. While some invest nationally or globally, others specialise in just one region.
US REIT Sectors:
REITs own and manage a variety of property types: shopping centers, health care facilities, apartments, warehouses, office buildings, hotels and others. Most REITs specialise in one property type only, such as shopping malls, timberlands, data centers or self-storage facilities.
Some REITs invest throughout the country or in some cases, throughout the world. Others specialise in one region only, or even in a single metropolitan area.
An ETF is a pooled investment fund which can be bought and sold on a stock exchange.
Today there are over 8000 ETF’s globally. Here are some of the lesser-known corners of the ETF universe.
Thematic ETFs are built around long-term trends such as climate change or rapid urbanization. By having more tangible focus points, these funds can also appeal to younger generations of investors.
In a healthy market, there can be a variety of different positions being taken by investors. Contrarian ETFs help to make this possible, allowing investors to bet against the "herd".
This approach uses a rules-based system for selecting investments in the fund portfolio, based on factors typically associated with higher returns such as value, small-caps, momentum, low volatility, quality, or yield.
Global Macro ETFs:
Some ETFs are designed to mimic strategies used by hedge fund managers. One example of such a strategy is global macro, which aims to analyze the macroeconomic environment, while taking corresponding long and short positions in various equity, fixed income, currency, commodities, and futures markets.
There are ETFs that track gold or oil, sometimes even storing physical inventories. Interestingly, however, there are commodity ETFs for even more obscure metals and agricultural products, such as zinc, lean hogs, tin, or cocoa beans.
There are 10 familiar ETF applications, spanning from simple (ETFs for core application) to complex (ETFs as risk management overlays).
Over- or underweight certain styles, regions, or countries on the basis of short term views. 72% of Institutions use ETFs for this purpose.
Build a long-term strategic holding in a portfolio. 68% of Institutions use ETFs for this purpose.
Manage portfolio risk in between rebalancing cycles. 60% of Institutions use ETFs for this purpose.
Fill in gaps in a strategic asset allocation. 57% of Institutions use ETFs for this purpose.
Maintain exposure in a liquid investment vehicle to meet cash flow needs. 54% of Institutions use ETFs for this purpose.
Facilitate manager transitions with ETFs. 44% of Institutions use ETFs for this purpose.
Risk Management / Overlay Management:
Mitigate market exposure while refining a long-term view. 42% of Institutions use ETFs for this purpose.
Maintain market exposure while refining a long-term view. 37% of Institutions use ETFs for this purpose.
Put long-term cash positions to work with ETFs to minimize cash drag. 37% of Institutions use ETFs for this purpose.
Environmental, social and governance (ESG) is a framework used to assess an organization's business practices and performance on various sustainability and ethical issues. It also provides a way to measure business risks and opportunities in those areas. In capital markets, some investors use ESG criteria to evaluate companies and help determine their investment plans, a practice known as ESG investing.
While sustainability, ethics and corporate governance are generally considered to be non-financial performance indicators, the role of an ESG program is to ensure accountability and the implementation of systems and processes to manage a company's impact, such as its carbon footprint and how it treats employees, suppliers and other stakeholders. ESG initiatives also contribute to broader business sustainability efforts that aim to position companies for long-term success based on responsible corporate management and business strategies.
Environmental, social, and governance (ESG) investing refers to a set of standards for a company’s behavior used by socially conscious investors to screen potential investments.Environmental criteria consider how a company safeguards the environment, including corporate policies addressing climate change, for example. Social criteria examine how it manages relationships with employees, suppliers, customers, and the communities where it operates. Governance deals with a company’s leadership, executive pay, audits, internal controls, and shareholder rights.
Environmental issues may include corporate climate policies, energy use, waste, pollution, natural resource conservation, and treatment of animals. ESG considerations can also help evaluate any environmental risks a company might face and how the company is managing those risks.
Considerations may include direct and indirect greenhouse gas emissions, management of toxic waste, and compliance with environmental regulations.
Examples of the E in ESG criteria could be investing in companies that:
Social aspects look at the company’s relationships with internal and external stakeholders.
Does it hold suppliers to its own ESG standards? Does the company donate a percentage of its profits to the local community or encourage employees to perform volunteer work there? Do workplace conditions reflect a high regard for employees’ health and safety? Or does the company take unethical advantage of its customers?
Socially responsible investing (SRI) is an investment strategy that highlights this one facet of ESG. SRI investors seek companies that promote ethical and socially conscious themes including diversity, inclusion, community-focus, social justice, and corporate ethics, in addition to fighting against racial, gender, and sexual discrimination.
Examples of the S in ESG criteria could be investing in companies that:
ESG governance standards ensure a company uses accurate and transparent accounting methods, pursues integrity and diversity in selecting its leadership, and is accountable to shareholders.
ESG investors may require assurances that companies avoid conflicts of interest in their choice of board members and senior executives, don't use political contributions to obtain preferential treatment, or engage in illegal conduct.
Examples of the G in ESG criteria could be investing in companies that:
Adopting ESG principles means that corporate strategy focuses on the three pillars of the environment, social, and governance. This means taking measures to lower pollution, CO2 output, and reduce waste. It also means having a diverse and inclusive workforce, at the entry-level and all the way up to the board of directors. ESG may be costly and time-consuming to undertake, but can also be rewarding into the future for those that carry it through.
Once upon a time, real estate embodied the epitome of capitalism. The trend, however, is growing quite the opposite way. The application of ESG standards on real estate (notably by governments and developers in many developed countries) has shown that this asset class is also relevant when these guiding principles are being applied.
Awareness is growing that real estate can have a significant social impact either through the form of rehabilitation of public spaces (indirectly attributing value to existing real estate), affordable housing, social housing, and care centers, or through an environmental focus investment on new buildings such as green buildings.
One ETF can give exposure to a group of equities, market segments, or styles. An ETF can track a broader range of stocks, or even attempt to mimic the returns of a country or a group of countries.
Although the ETF might give the holder the benefits of diversification, it has the trading liquidity of equity. Because ETFs trade like a stock, you can quickly look up the approximate daily price change using its ticker symbol and compare it to its indexed sector or commodity.
ETFs have much lower expense ratios compared to actively managed funds.
The dividends of the companies in an open-ended ETF are reinvested immediately. One exception: Dividends in unit investment trust ETFs are not automatically reinvested, thus creating a dividend drag.)
ETFs can be more tax-efficient than mutual funds. As passively managed portfolios, ETFs (and index funds) tend to realize fewer capital gains than actively managed mutual funds.
There is a lower chance of ETF share prices being higher or lower than their actual value. ETFs trade throughout the day at a price close to the price of the underlying securities, so if the price is significantly higher or lower than the net asset value, arbitrage will bring the price back in line. Unlike closed-end index funds, ETFs trade based on supply and demand and market makers will capture price discrepancy profits.
For some sectors or foreign stocks, investors might be limited to large-cap stocks due to a narrow group of equities in the market index. A lack of exposure to mid- and small-cap companies could leave potential growth opportunities out of the reach of ETF investors.
Longer-term investors could have a time horizon of 10 to 15 years, so they may not benefit from the intraday pricing changes. Some investors may trade more due to these lagged swings in hourly price. A high swing over a couple hours could induce a trade where pricing at the end of the day could keep irrational fears from distorting an investment objective.
Most people compare trading ETFs with trading other funds, but if you compare ETFs to investing in a specific stock, then the costs are higher. The actual commission paid to the broker might be the same, but there is no management fee for a stock. Also, as more niche ETFs are created, they are more likely to follow a low-volume index. You might find a better price investing in the actual stocks.
There are dividend-paying ETFs, but the yields may not be as high as owning a high-yielding stock or group of stocks. The risks associated with owning ETFs are usually lower, but if an investor can take on the risk, then the dividend yields of stocks can be much higher. While you can pick the stock with the highest dividend yield, ETFs track a broader market, so the overall yield will average out to be lower.