In the world of real-estate investing, managing the risk reward relationship that arises out of structures which typically pay all (or nearly all) of their cash flows to trust holders is of utmost importance.
Many real-estate investment trusts (REITs) pay dividends which often yield high single digits, however, housing slowdowns and macroeconomic risks to cash flows have the potential to disproportionately affect these securities to a greater degree on the downside.
Funds like DFE Real Estate Securities (DFREX) aim to mitigate this risk, offering a wide range of real estate options over a broad spectrum of real estate categories.
The fund has low turnover and is weighted to the market cap of various real estate funds, focusing on lower risk U.S. companies that are involved in the holding, development, or management of real property. The majority of such companies are structured as REITs.
Owning a fund which in turn owns a broad spectrum of other funds in a market cap weighted format allows investors to gain exposure to this sector in perhaps one of the lowest risk ways possible.
Over the past 10 years, this fund has grown nearly five-fold, showcasing a "slow and steady" increase over time commensurate with some of the best low turnover funds out there.
In fact, this fund has performed in the top decile among competing funds, outperforming the broader index by almost a full percentage point each year for the past decade. Fund owners now experience a yield of approximately 4.3%, a yield which has decreased in part due to impressive capital appreciation in recent years, but indicates the value of owning a low cost, highly diversified fund in this space.
Invest wisely, my friends.
