Markets have had a volatility spike during the last week where most of the investment classes have been hit (long bonds, stocks, gold, REITs, etc.). This creates a nice entry point into REITs if you are following the sector.
Nothing much has happened in the direct property markets but we see a lot of equity issuance in the listed space (Hamborner REIT, Befimmo, Technopolis, ADO Properties, Cofinimmo etc.). Many of our favorite REITs and property stocks have thus been issuing shares and raising equity recently. Why now? …well, the cost of debt is coming down very fast as we could see when Citycon launched a 10 year corporate bond a few weeks ago at a coupon of 1,25 %.
Then imagine most REITs doing the same, raising equity and debt 50/50 at these levels (Equity at a premium! and long 10year fixed at closer to 1 %!). This will create a situation where we will continue to see NAVs increasing during the coming years. As you can see from the chart below we would like to debunk the myth that you should only try to buy REITs at a discount.
Click to enlargeSource; (FTSE EPRA/NAREIT Asia Index TR (Black), S&P500 TR (burgundy), FTSE EPRA/NAREIT Developed Index (World, red) and FTSE EPRA/NAREIT Developed Europe Index TR (green), MSCI Daily TR World Index (blue))
REIT’s grow their NAVs and usually next year NAV will be higher than the previous year NAV. REITs have demonstrated this over several decades and shown that they can increase their dividends faster than inflation and that they are able to increase their NAVs at a comparable or even faster pace than opportunistic value add private equity funds. We feel comfortable with current valuations that are slightly on a premium, especially when we look at the market dynamics and the big picture where it just makes sense to increase the “real assets” part in any asset allocation going forward. Also, if REITs continue financing at long term fixed rates it will clearly reduce their exposure to the risk of rising interest rates in the future.
Click to enlarge Source: Charts and data are calculated by UB Real Asset Management Ltd, 2016/09/16Click to enlarge Performance of UB REIT funds, Source UB Asset Management
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Global X Funds launches Millennials Thematic ETF Global X Funds, the New York-based provider of exchange-traded funds (ETFs), today launched the Global X Millennials Thematic ETF (Nasdaq: MILN). MILN is the ninth ETF in Global X’s suite of thematic funds, and the first in its ’People’ category, which focuses on emerging trends pertaining to changing demographics and consumer behaviors. Global X plans to further expand the ’Thematic – People’ category with launches of the Global X Longevity Thematic ETF (LNGR) and the Global X Health & Wellness Thematic ETF (BFIT) expected next week.
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There are over 90 million Millennials in the United States, making it the largest generation. MILN includes those companies that are among the best positioned to benefit as Millennials, those aged 16-36, gradually enter peak earning years, and become a major force within the U.S. economy.
Millennials currently earn roughly $2 trillion in income, and are poised to earn roughly $8 trillion by 2025. Additionally, the total transfer of wealth from Baby Boomers to Millennials is expected to reach $40 trillion.
”As Millennials enter their prime earning years, companies that cater to their unique spending preferences are expected to gain market share,” said Jay Jacobs, director of research of Global X. ”These companies can come from a broad range of industries and hit on a variety of sub-themes inherent with millennials, such as the use of social media, consumption of digital content, a focus on health and wellness, and investment in education and career advancement, among many others.”
Thematic investments aim to access the high growth potential of companies at the forefront of a long-term, structural changes in the economy. By transcending classic sector and industry classifications, thematic investing seeks to harness macro-level trends and the investments best suited to benefit from those trends.
”Thematic investing is a research-driven approach that has long been available to institutional investors seeking growth opportunities,” added Mr. Jacobs. ”At a time of weak earnings and low GDP growth, we’re excited to broaden our growth-seeking thematic suite of ETFs to now include strategies that seek to benefit from substantial shifts in demographics and consumer behavior.”
ABOUT GLOBAL X
Seeking to provide access to high-quality and cost-efficient investment solutions, Global X is a New York-based sponsor of exchange-traded funds (ETFs). Founded in 2008, we are distinguished by our smart core, income, alpha, risk management and access suites of ETFs and have more than 40 funds available across U.S. and foreign exchanges. Global X is recognized as a leader in developing intelligent investment solutions for our clients.
DISCLOSURE
Investing involves risk, including the possible loss of principal. The investable universe of companies in which the Fund may invest may be limited. The Fund invests in securities of companies engaged in Information Technology which can be affected by rapid product obsolescence, and intense industry competition. In addition to normal risks associated with investing, international investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles or from social, economic or political instability in other nations. The fund is non-diversified which represents a heightened risk to investors.
Carefully consider the Funds’ investment objectives, risk factors, charges, and expenses before investing. This and additional information can be found in the Funds’ prospectus, which may be obtained by calling 1-888-GX-FUND-1 (1.888.493.8631), or by visiting www.globalxfunds.com. Read the prospectus carefully before investing.
Global X Management Company, LLC serves as an advisor to the Global X Funds. The Funds are distributed by SEI Investments Distribution Co., which is not affiliated with Global X Management Company or any of its affiliates.
