Real estate ETFs see these types of properties holding up in ‘tricky’ time for investing

Hi! This week’s ETF Wrap takes a look at real estate funds at a “difficult” time for investing. You’ll find views from Greg Kuhl, a portfolio manager for the global real estate team at Janus Henderson Investors, as well as David Auerbach, a managing director at Armada ETF Advisors.

As both stocks and bonds have fallen this year, some real estate ETFs could ease the pain for investors.

Relatively speaking, “REITs have done really well,” said Greg Kuhl, portfolio manager for Janus Henderson Investors’ global real estate team, in a phone interview. Kuhl said he is a portfolio manager for the Janus Henderson US Real Estate ETF, an actively managed fund that invests in real estate investment trusts, or REITs, listed in the US and Canada.

“You have something that behaves differently” than stocks and bonds, and that kind of diversification is proving helpful right now, he said.

Shares in the Janus Henderson US Real Estate ETF JRE are down just 0.1% this year through Wednesday, according to FactSet data. Funds that track the S&P 500 and an index of the overall U.S. investment-grade bond market have had a tougher time so far in 2022.

For example, shares in the SPDR S&P 500 ETF Trust SPY are down 6.4% year to Wednesday, while the iShares Core US Aggregate Bond ETF AGG is down 9.2% over the same period, FactSet data shows.

“It’s a difficult environment for investment,” with “backlashes” of high inflation, rising interest rates and a potential slowdown in the economy as the Federal Reserve continues to tighten monetary policy, Kuhl said. He said he was looking for “pricing power” or landlords who could “push” rents when occupancy levels are high.

According to Kuhl, the Janus Henderson US Real Estate ETF typically holds 20 to 30 positions in REITs linked to different types of real estate, such as industrial, warehouse, and residential.

“From a pricing power perspective, the strongest sector in real estate is industrials,” he said. “Nationally, warehouse occupancy rates are at an all-time high,” while rental growth is “about as high as ever.”

Another market area, self-storage, “surprised us a little”, says Kuhl. The pandemic has created “a new source of demand for this asset class” as people have “cleaned up” to make room for their home offices.

Even if the pandemic ends, the “hybrid” work trend will likely “remain” as many people may not want to return to the office five days a week, he said. “It’s still a lot cheaper to store things in a storage room than, for example, to rent a two-bedroom apartment instead of a one-bedroom apartment.”

Meanwhile, apartments and single-family homes should benefit as rising U.S. house prices and rising mortgage rates create affordability concerns, according to Kuhl and David Auerbach, managing directors at Armada ETF Advisors.

“The American dream of home ownership is becoming increasingly out of reach for the average American,” Auerbach said in a phone interview. “Consumers will turn to other avenues, such as single-family homes, apartments or prefab communities.

Armada’s Home Appreciation US REIT ETF HOUSE,
+0.21%,
An actively managed fund that focuses on residential property has exposure to that type of property, he said. The ETF, which started trading in early March, is up nearly 4% this week based on Thursday afternoon’s trading, FactSet data showed at its latest check.

Auerbach said the Home Appreciation US REIT ETF holds shares of American Campus Communities Inc. ACC,
,
the US high-end student housing developer that Blackstone agreed to buy in a deal that values ​​the company at $12.8 billion including debt. American Campus Communities shares rose on news of the agreement, which the dormitory owner announced on April 19.

In other ETF-related news this week, Fidelity Investments created a Metaverse experience for investors to learn more about stocks, mutual funds, and exchange-traded funds. The Fidelity Metaverse ETF FMET,
-2.40%
started trading on Thursday.

See: Fidelity tries to attract investors through “interactive” Metaverse experience

Here’s your weekly look at the best-performing ETFs over the past week through Wednesday and those that ranked in the top five, based on FactSet data.

The good…
The bad…
Worst Actors

%Perfomance

Vanguard Extended Duration Treasury ETF EDV,
-0.95%

-4.1

Vanguard Long Term Corporate Bond ETF VCLT,
-1.47%

-3.3

ARK Genomic Revolution ETF ARKG,
-4.90%

-3.2

SPDR Portfolio Long Term Corporate Bond ETF SPLB,
-1.48%

-3.1

AdvisorShares Pure US Cannabis ETF MSOS,
-2.74%

-3.1

Source: FactSet, as of Wednesday April 20, excluding ETNs and leveraged products. Includes ETFs traded on the NYSE, Nasdaq and Cboe worth USD 500 million or more

ETF reads:

Cathie Wood’s flagship ARK fund plunges more than 60% from its 2021 peak (MarketWatch)

Optimism for US spot bitcoin ETF grows with Teucrium Futures Fund (CoinDesk) approval

Roundhill waits eight months for its WEED ETF to launch on 4/20. (Bloomberg)

ETFs are most exposed to Netflix after earnings crisis (ETF.com)

A bond hedge crushes all competing ETFs and posts a 57% gain (Bloomberg)

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