1/24/2013 6:30 PM ET|
5 funds for a real estate rebound
Mutual funds that invest in housing or commercial real estate should benefit from the sector’s gradual recovery.
And it looks like the good times will continue. Consider that during the first nine months of 2012, housing permits spiked by 32%, and the median single-family home price rose about 6%. During this time, the growth in sales of new homes increased 23%, versus 8% for existing homes.
Some of the reasons for the rebound: an improved economy, historically low mortgage rates, increased household formation and lower unemployment rates.
So, what are some real estate funds worth looking at? Here are five:
Neuberger Berman Real Estate
Steve Shigekawa and Brian Jones, who manage the Neuberger Berman Real Estate (NREAX) fund, take an expansive approach to finding investment opportunities. They'll consider the macro environment and regional trends. When analyzing individual companies, they'll look at both earnings potential and the net asset values.
As a result, the portfolio includes some unexpected names, such as Rayonier (RYN), which is a real estate investment trust that focuses on timber properties.
The eclectic strategy has worked out quite well. During the past year, the fund has returned about 16.85%. In fact, the average annual return for the past three years was 21.54%.
Cohen & Steers Realty Shares
Martin Cohen and Robert Steers are among the top investors in real estate. For the past 21 years, they've managed the Cohen & Steers Realty Shares (CSRSX) fund, which has posted an average annual return of 12.6%.
And recent performance has been strong too. For the past year, the return was 16.17%.
To get these returns, Cohen and Steers look for small- and mid-cap companies, which often have lots of growth potential. They also look for megatrends, such as the move toward apartment rentals and the growth in health-care facilities.
ING Global Real Estate
The U.S. market isn't the only one seeing growth. Asia, for one, is another hot spot. One way to capitalize on this is through the ING Global Real Estate (IGLAX) fund. The portfolio managers, who include T. Ritson Ferguson and Steven Burton, have more than 20 years experience in global real estate markets. To come up with investment ideas, they scour such things as growth rates of gross domestic product, population trends and vacancy rates.
So far, Ferguson and Burton have found opportunities in Japan (Mitsubishi Estate and Mitsui Fudosan), Australia (Westfield Group), Hong Kong (Cheung Kong) and even France (Unibail-Rodamco). Yet, they've also invested in U.S. companies, such as Simon Property Group (SPG) and Boston Properties (BXP).
During the past year, ING Global Real Estate posted a gain of 20.45%. Its three-year average was 13.31%.
TCW Total Return Bond I
Investing in mortgages is another way to play the real estate market. And one fund that has been posting top returns in the sector is TCW Total Return Bond I (TGLMX). For the past year, the gain was 13.13%.
Yet the fund's managers -- who include Mitchell Flack, Tad Rivelle and Bryan Whalen -- have been willing to ramp up their appetite for risk. That is, they've invested heavily in nonagency residential mortgages. Then again, if the U.S. economy does pull off a sustainable recovery, these securities are likely to continue strong.
The management team also is rigorous with its analysis. For example, it has created a custom model that looks at loan modifications, which can be a big source of risk.
Vanguard REIT Index ETF
More and more, investors are looking to exchange-traded funds as a way to play sectors. And in the real estate market, the Vanguard REIT Index ETF (VNQ) is definitely a good choice. The fund has an expense ratio of a mere 0.10% and the one-year return is a sizzling 19.09%.
More from InvestorPlace:
VIDEO ON MSN MONEY
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
- Dec gold fell deeper into negative territory after pulling back from a session high of $1295.30 per ounce set at the open of floor trade. It brushed a session low of $1281.90 per ounce moments before settling with a 1.1% loss at $1283.10 per ounce.
- Sep silver touched a session high of $20.70 per ounce in early morning action but retreated into the red. Unable to regain momentum, it settled 0.9% lower at $20.41 per ounce, just above its session low of $20.40 ... More
More Market News
|There’s a problem getting this information right now. Please try again later.|
MUST-SEE ON MSN
- Video: Easy DIY smoked meats at home
A charcuterie master shares his process for cold-smoking meat at home.
- Jetpacks about to go mainstream
- Weird things covered by home insurance
- Bing: 70 percent of adults report 'digital eye strain'