REIT Performance vs. Equity Market Performance
Chart of the Week for August 14 - August 20, 2009
Real Estate Investment Trusts ("REITs") are investment vehicles with holdings that are generally related to real estate markets, such as mortgages, real estate-related companies, shopping centers, office buildings and hotels. REITs employ a variety of strategies and vary in their level of diversification. Historically, some investors have used REITs to obtain exposure to the real estate sector and to possibly hedge against inflation. The popularity of REITs over the last decade has been influenced by their strong performance relative to the broader equity market, as can be seen in the chart above.
After outpacing the equity markets for a number of years, as measured by the S&P 500 Index, REITs, as measured by the MSCI U.S. REIT Index, have suffered a setback in recent years. 2007 marked the first calendar year since 1999 during which REITs underperformed the general equity market. The underperformance continued in 2008 and year-to-date in 2009 through July month end.
The global credit crisis, spurred on by the collapse of a housing price "bubble," has contributed to the difficult market environment for REITs. However, some recently released economic data points toward a possible stabilization of the housing market, which could benefit REIT performance. In the most recent 1-month period ended July 31, 2009, REITs outperformed the general equity market.
As with other asset classes and the markets in general, timing the real estate market is a difficult exercise. A well diversified portfolio coupled with an appropriate time horizon and strategy has served investors better than attempting to time the markets or asset classes.
This illustration was compiled by information from outside sources. These companies are not affiliated with ICMA-RC. This information is being provided for educational purposes and is not intended to be construed as or relied upon as investment advice. ICMA-RC does not offer specific tax or legal advice. Individuals are advised to consider any new investment strategies carefully prior to implementing.
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The performance data quoted represents past performance. Past performance is no guarantee of future results. Investment returns and principal value will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data illustrated. For performance data current to the most recent month end, contact ICMA-RC Services, LLC by calling 800-669-7400 or by writing to 777 North Capitol Street, NE, Washington, DC 20002-4240. Para asistencia en Español llame al 800-669-8216. Performance data current to the most recent quarter end is available by visiting www.icmarc.org.