Invest in: REITs
REITs are a type of property fund, popular with investors who are looking to invest in the property sector without the liquidity constraints of physical property assets. But what exactly are REITs and how can you use them in your portfolio? Read on to find out more.
Capital at risk.
Why should I consider REITs?
A REIT, or Real Estate Investment Trust, is a listed company that invests in property. It can own property assets directly, it may be an operator, or simply invest in different real estate related companies.
The focus for REITs tends to be on generating an income, so it can be useful for income-motivated investors. Because REITs are listed on the stock exchange, they are a liquid way of gaining exposure to real estate assets, which are often very illiquid.
Market environment impact
As with most property funds, REITs often struggle in rising rate environments as the cost of borrowing goes up. However, REITs have historically performed relatively well in a high inflation environment and may offer some protection on this front.
Over the long term, REITs’ performance is correlated with property, which makes sense as this is the underlying investment asset. However, in the short-term, performance is more closely correlated with equities. This is because REITs are listed companies and so the share price moves up and down with equity markets and investor sentiment in the short-term. Over a longer period of time, performance should reflect that of the underlying assets (i.e. property).
What are the risks?
It is common for REITs to use gearing (debt) within their strategy which adds complexity and can exacerbate losses in falling markets. On the flip side, gearing can boost returns for REITs when markets are rising.
REITs can be useful for investors who wish to gain long-term exposure to property, however they may not provide as much downside protection from equity market movements in the shorter-term compared to directly-held property assets.
As with all assets, the value of your investments can go down as well as up and your capital is at risk.
Our top picks for investing in REITs
We’ve covered the basics of what REITs are and how they can be used in your portfolio. The next hurdle: how do you pick the right ones? This is where we come in.
At TILLIT, our industry experts roam the market to find what they believe to be the best-in-class funds. We have a range of property funds in our Universe, including REITs, funds that invest in REITs and funds that invest directly in property assets. Below are the funds that have made the cut.
Capital at risk.
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