Resilient REITs

A close look at the last cycle in which the Fed raised rates (June 2004 - June 2006), shows REITs fared well despite the perceived headwind of higher rates.

As the chart below shows, REITs (real estate investment trusts) declined in the months prior to the first 2004 increase, then actually outperformed the broader equity markets during the two-year period that followed.

Data: July 1, 2004 through June 30, 2006. Morningstar. As of January 2, 2017. Most recent data available.

What does this mean for investors?

Correlations are widening between global real estate securities and U.S. equities, global equities and global bonds, providing a strengthened case for REITs as a long-term portfolio diversifier. Entering a period of rising rates, investors should consider REITs to help support long-term growth and income objectives.

The views expressed represent the Manager’s assessment of the market environment as of January 2017, and should not be considered a recommendation to buy, hold, or sell any security, and should not be relied on as research or investment advice.

The FTSE EPRA/NAREIT Developed Index tracks the performance of listed real estate companies and real estate investment trusts (REITs) worldwide, based in U.S. dollars.

The S&P 500 Index measures the performance of 500 mostly large-cap stocks weighted by market value, and is often used to represent performance of the U.S. stock market.

The MSCI World Index is a free float-adjusted market capitalization weighted index designed to measure equity market performance across developed markets worldwide.

The Bloomberg Barclays Global Aggregate Index provides a broad-based measure of the global investment grade fixed-rate debt markets.

Index performance returns do not reflect any management fees, transaction costs, or expenses. Indices are unmanaged and one cannot invest directly in an index.

Carefully consider the Funds' investment objectives, risk factors, charges, and expenses before investing. This and other information can be found in the Funds' prospectuses and their summary prospectuses, which may be obtained by visiting or calling 800 523-1918. Investors should read the prospectus and the summary prospectus carefully before investing.


Investing involves risk, including the possible loss of principal.

Past performance does not guarantee future results.

Narrowly focused investments may exhibit higher volatility than investments in multiple industry sectors.

REIT investments are subject to many of the risks associated with direct real estate ownership, including changes in economic conditions, credit risk, and interest rate fluctuations.

A REIT fund's tax status as a regulated investment company could be jeopardized if it holds real estate directly, as a result of defaults, or receives rental income from real estate holdings.

Diversification may not protect against market risk.

“Non-diversified” funds may allocate more of their net assets to investments in single securities than “diversified” funds. Resulting adverse effects may subject these funds to greater risks and volatility.

International investments entail risks not ordinarily associated with US investments including fluctuation in currency values, differences in accounting principles, or economic or political instability in other nations. Investing in emerging markets can be riskier than investing in established foreign markets due to increased volatility and lower trading volume.


Subscribe to hear from our portfolio managers and analysts on trending topics

I'm interested in hearing from:
Or select:

Subscribe to Insights

Thank you for your subscription!

Top charts of the month