|Global Real Estate Funds See Sharp Rebound|
Stan Luxenberg - The Street NOV 07, 2012 3:50 PM
With economies stabilizing, there is increasing demand for offices and warehouses.
The gains represent a sharp rebound from last year, when the funds lost 10.1%. In 2011, investors fled many foreign real estate stocks because of fears that the crisis in Europe could lead to a global downturn. The losses were particularly severe in China, where the government took steps to cool overheated real estate markets.
This year the picture has improved in many markets. To boost its economy, the Chinese central bank has cut interest rates and made it easier for banks to make loans. In countries such as Australia and Japan, the economies are growing slowly, and the crisis in Europe appears less dangerous for the moment. All the positive developments have resulted in increased demand for office space at a time when there is little new construction.
Real estate funds focus on companies that develop and own commercial properties, including offices, shopping malls and apartment complexes. Global funds hold mixes of U.S. and foreign stocks.
Overseas holdings can make intriguing additions for investors who are seeking to diversify portfolios. Many foreign real estate companies are growing faster than their typical U.S. counterparts. In addition, global stocks pay relatively rich dividends. At a time when FTSE NAREIT index of U.S. real estate investment trusts yields 3.4%, yields of 6% are common in Australia and other countries.
Investors seeking a relatively cautious choice should consider Invesco Global Real Estate Income (MUTF:ASRAX)
Portfolio manager Paul Curbo is keen on Japanese property companies. He says the shares are among the cheapest in the world, selling for discounts to the value of the underlying properties. A holding is Mitsui Fudosan (PINK:MTSFY)
He also holds Prologis
Another fund that excelled during the financial crisis is Cohen & Steers Global Realty (MUTF:CSFAX)
McKinley has a stake in Australia, which is a big supplier of raw materials to China. With the Chinese economy stabilizing, prices of Australian mall properties have been strengthening. He owns Westfield Group (PINK:WFGPY)
This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.