Last September I wrote an article for TheStreet.com pooh-poohing the RMR Asian Pacific Real Estate Fund (RAP).This was a bad call.
Lately I have been learning about and warming up to the idea of adding a little bit of of international real estate, probably not RAP however, to client portfolios.
I am trying to learn about the various products out there. Alpine has a CEF (AWP) and an OEF (EGLRX). StateStreet has the SPDR DJ Wilshire Intl Real Estate ETF (RWX). There is the ING Clarion Global Real Estate Fund (IGR), Cohen & Steers Worldwide Realty Income (RWF) and WisdomTree has an ETF coming today with ticker DRW that could yield in the mid-threes or higher.
I have also looked at several individual stocks too. I'm sure I am missing several exchange traded products and other than EGLRX I didn't look for OEFs.
I am ever on a quest for asset classes that have a low correlation to US equities and maybe have a little yield too. RWX does not really have much yield but as I mentioned the WisdomTree product looks like it will.
My inclination at this point, which is still early in the learning process, would be to allocate 2% to a combo of a fund and an individual stock from a country I liked from a top down perspective and if there was a stock that I would want to own from the bottom up. Obviously this sort of mix will not fit in all accounts so in those cases I would just go with the fund.
The picture is one I found on the net of T's favorite real estate spot, Croatia. While I can't find an exchanged traded anything that isolates Croatia (open to suggestion) every picture that involves water from there looks spectacular. This of course may not mean anything in terms of investment merit.
If you know of any funds that I missed, please leave the ticker in the comments.
16 comments:
If you're ready to enter the Croatian stock exchange directly you'll find two CEF's, Terra Firma and Terra Mediterranea.
(I'm next door in Slovenia and no, we don't have any over here :)
Be careful about accounting practices, though... I'm not at all sure there's any sort of meaningful marking-to-market taking place so the funds' operating results may appear very random.
Rog, my buddy Gary first told me about FIREX about 2-3 years ago. Might be worth looking at.
Roger, you seem to be interested in playing potential currency swings. Are you familiar with JP MORGAN PRINCIPAL PROTECTED NOTE 0.000% 01/22/2009 BASKET OF 4 DEVELOPED MARKET CURRENCIES. This is a new issue which is Linked to the Performance of a Weighted Basket of Four Currencies Relative
to the U.S. Dollar due January 22, 2009 (Australia, Canada, Euro, Yen).
You can get prospectus and info on these notes at: http://personal.fidelity.com/misc/framesets/ppnsfixedincome_frame.shtml
I'm really not familiar with the pros and cons of these notes although it seems the worst you can do is just get your principal back in two years.
Any thoughts?
I think better diversification can be had with currencies other than the Euro and Yen and diversification is the reason behind my interest.
Further the yen, as I mentioned the other day is just a weird one for me. It seems to be the worst currency in the world, going down against even the greenback. At some point it will go up in a violent manner but the idea of waiting for that seems to be at odds with my intention, but thats just me.
Roger, thanks for the info.
I have been thinking about allocating a small percentage to Intl real estate for my buy and hold portfolio but haven't pulled the trigger yet. I'll keep an eye on the Wisdom Tree product.
Paul Farrell on Marketwatch.com has yet another article on lazy portfolios. http://tinyurl.com/244yng
This time he evaluates the performance of Paul Merriman's ultimate buy and hold porfolio - as implemented through Vanguard, Fidelity or T. Rowe Price funds.
All the porfolios are 60/40 and all outperformed the S&P 500 from the 2000 peak and from the 2002 bottom.
Pretty strong argument for this approach imo.
i'm on board with the concept to be sure.
i do think it can be implemented in many different ways.
Careful, many Eastern European property developers borrow in Euros, so may be exposed if economy runs into trouble (ie the Euro convergence play begins to diverge). These countries have generally under-developed mortgage markets and very strong credit growth, and rising current account deficits; some share economic charatcerisitcs similar to that of dollar-pegged latam (argentina) & Asian countries pre-1998 crisis.
Jeffrey Saut of Raymond James has been touting Global Reits for sometime. I don't own any, but he mentioned in his remarks today that Barron's had an article. I've not cracked my Barron's yet.
Being completely ignorant--
REITs and real estate here in the US have generally weakened over the last year (REITS probably just started to.)
Do you think that real estate in general will just do better in other countries? And if so, why? If interest rates are rising in general, that would seem to hold back real estate everywhere (I base this on other articles and the raising of rates you talk about.)
Also as you spoke of a possible China correction--do you think that such a correction would not spill over into real estate?
I'm just wondering at the correlations and real diversifications--my thinking along the lines that real estate has been pretty hot in many countries--is the party over--or if not, in your opinion, why isn't it over in other countries--what growth factors will keep it going?
Maria, I certainly don't have all the answers but while the party could be over the economic strength in some of these countries potentially matters more than higher rates.
Here think about Norway, Australia and Marc Faber's favorite which I beleive is Thailand.
Also I would add that most of these countries are so much less complex than the US that strong growth can be practically the only thing that matters--as a function of less mature economies.
One last point, this is an asset class that brings down correlation and if I do anything it would be 2% or so , which is how I allocate most things so if I;m wrong the consequence is less.
Thanks Roger. You make interesting points. One other thing I read--and I don't know how this affects commercial real estate, REITS or ETFs, but I don't think australia allows foreigners to own property. I don't know if this means land/house/commercial, but I read that little factoid in Jim Roger's book. Something about him wanting to buy property there and being unable to.
This was many years ago when he did his last around the world trip and I remember him writing something about anytime there were isolationist rules like that, it generally hurt the country in the long run.
That said, Aussie is running pretty strong without much help--since they have so many natural resources that the world needs.
I'm sure you'll keep us posted on your decision and it'll be interesting to see how it turns out!
SWAIX
Roger,
I'm interested in the idea here but admit I haven't spent a lot of time on foreign RE. I would just add something in relation to the currency hedging discussion. PLMIX is a fund I mentioned to you a while back and we've been using for some time. I strongly suggest checking it out. Its a play on yields and forex of emerging markets but you get a basket of them...no Yen and Euro. Its done quite well but I think its a nice bond-like surrogate to allocate to the growth in emerging markets.
Matt,
I am sorry I don't recall when you mentioned PLMIX but I have owned it for a few clients for quite a while and wrote about for TSCM a year and a half ago.
C&S has several international or global real estate funds.
IRFAX is the only one I own, but there are many varieties on this theme.
Post a Comment