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  A Reminder To Investors That REITs Are Financials
Posted Under: Sectors
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View from the Observation Deck

  1. From 2000-2013, the FTSE NAREIT Equity REIT Index posted an average annual total return of 11.66%, compared to 1.59% for the S&P 500 Financials Index.
  2. Over those 14 calendar years, the FTSE NAREIT Equity REIT Index generated positive total returns in 12 of them, compared to 9 for the S&P 500 Financials Index.
  3. Some investors were concerned about the prospects for equity REITs moving forward after enduring a below average year of performance in 2013.
  4. The FTSE NAREIT Equity REIT Index posted a 2.86% total return in 2013, no match for the 35.63% total return on the S&P 500 Financials Index.
  5. Equity REITs, like most yield-oriented securities, experienced a notable sell-off due to the sharp spike in the yield on the 10-Year Treasury (T-Note) beginning in early May 2013 (Fed's tapering comments).
  6. What investors may not realize is the sheer dominance of equity REITs, in terms of cumulative total return, over the broader financial sector from 2000-2012: 355.30% vs. -8.02%.
  7. Since 1994, there have been seven instances, including 2013, where fears of rising interest rates caused REITs to decline by an average of 12%, according to Jonathan Litt, CEO of LandandBuildings.
  8. In the previous six occurrences, average returns subsequent to the declines over the next 30 days, 90 days and 12 months were 6.8%, 9.2%, and 28.7%, respectively.
  9. Year-to-date through 1/27/14, the FTSE NAREIT Equity REIT Index was up 1.15%, on a total return basis, compared to a loss of 3.96% for the S&P 500 Financials Index.
  10. The FTSE NAREIT Equity REIT Index stood 23.8% (as of 1/27/14) below its 10-year high set on 2/7/07, according to Bloomberg.

This chart is for illustrative purposes only and not indicative of any actual investment. There can be no assurance that any of the projections cited will occur. The illustration excludes the effects of taxes and brokerage commissions or other expenses incurred when investing. Investors cannot invest directly in an index. The FTSE NAREIT Equity REITs Index is a free float adjusted market capitalization-weighted index that includes all tax qualified REITs listed on the major U.S. exchanges, while the S&P 500 Financials Index is a capitalization-weighted index comprised of 81 financial constituents.

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Posted on Tuesday, January 28, 2014 @ 2:29 PM • Post Link Print this post Printer Friendly

These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.
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