Death, taxes and… With the odd exception such as Greece where tax evasion is deemed by some to be a national sport, there are only two things in life which are certain – death and taxes. Perhaps we should add a third item to that list – US interest rates are going up. Speculation about the timing and the magnitude is not the purpose of this document. Rather, what matters is that we are likely at or near a structural low in terms of US interest rates. The yield on the US 10-year Treasury increased from an intra-day low…
MARKET OVERVIEW The REIT & Bond Tango The listed real estate market continues to be influenced by movements in the bond markets and this was the main reason for the 8.12% correction by Global REITs during the second quarter. REITs are currently more correlated with bonds than they have ever been in history. The relationship between the two assets classes has increased significantly during the past 3 years and they look as though they are dancing the tango.
With its relatively low beta to global equities, global REITs can provide valuable diversification within a multi-asset-class (MAC) portfolio. This can be particularly useful at times when the risk of a correction in equity markets is great. Regardless of the outlook for equities, however, the inclusion of lower beta positions can still improve the risk-adjusted returns of a MAC portfolio.
Market Overview Entering 2015, the theme was one of divergence of economic performance amongst various regions and countries. Given this, as well as divergent global monetary policies, currencies were also expected to continue to exhibit heightened volatility (particularly weakness against the USD in many cases).
The start of 2015 has been characterised by a flow of capital to safe-haven real estate markets like New York and London. Investors are indeed willing to “pay-up” for what is regarded as a safe investment.As part of our philosophy to look past what the mainstream market commentators and analysts are recommending, we found a market that is still early in its upcycle and worthy of more attention from real estate investors.
Global property funds produced an impressive return of close to 30 percent to the end of December 2014. This may prompt you to consider including these funds in your portfolio – or is the party over, and will latecomers be doomed to pedestrian or even negative returns?