Making Room For Real Estate

In June, S&P Global Market Intelligence hosted a client webcast to discuss the pending elevation of Real Estate as a GICS sector. The webcast provided insight into the timing of the GICS change – in September 2016 – how asset managers were recently positioned to Real Estate relative to the benchmark and how real estate has less correlation to bonds and yet outperformed the broader equity indices on a consistent basis.

Attendees were asked why they thought active general equity managers have been consistently underweight REITs. Real estate hidden in Financials sector that is larger and more familiar was chosen most by the audience, 39%, while difficulty in using REIT-specific valuation metrics was selected by 31%. During the event, active mutual funds were highlighted for their familiarity with REITs, but S&P Global Market Intelligence noted that the weightings were quite small. American Funds Investment Company of America (AIVSX), Fidelity Dividend Growth (FDGFX) and JP Morgan US Equity Fund (JMUEX) had less than 1% of their assets in REITs.

In addition, we pointed out that more money has flowed into Real Estate focused ETFs in 2016 than into health care or energy ETFs, despite those sectors having a larger weighting in the S&P 500 index. Watch a video replay here.