Real estate exchange-traded funds (ETFs) are experiencing a 25 percent decline in returns as declines in the publicly traded REIT sector drag them down.
The fate of real estate ETFs is closely tied to publicly traded REITs because a significant portion of real estate ETFs is built with publicly traded REIT securities. Aggressive interest rate increases significantly impacted publicly traded REITs in 2022.
Despite the declines, Greg Kuhl, a portfolio manager, told WealthManagement.com that public REITs are now repriced for the new, higher interest rate environment. Kuhl explained that the repricing should make public REITs a more attractive real estate allocation option than non-traded or private REITs.
Additionally, market challenges have stalled momentum among sponsors and the total assets value for real estate ETFs. As of March 27, there are 62 real estate ETFs with $66 billion in total assets, compared to 57 real estate ETFs with $73.3 billion in assets as of March 31, 2021, according to CFRA Research.
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