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By clicking on the link of any of the above-named strategies, you will be taken to a separate website devoted to that strategy or product.  Before investing in any of the products or strategies listed above, one should carefully consider the strategies’ or funds’ investment objectives, risks, charges and expenses. This, and other, information can be obtained from each separate website devoted to the strategy. For mutual funds, the prospectus and summary prospectus can be obtained at the respective mutual fund websites. The prospectus or summary prospectus should be read carefully before investing.

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08/22/2014

 

 

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Investment Themes

Why REITs?

Low correlation to other asset classes: Historically REITs have had low correlation with stocks and bonds, which may lower portfolio standard deviation.

Potential to act as an inflation hedge: Inflation increases replacement costs (e.g. land, materials, labor), which may increase rental revenue

Tax Efficiency: REITs, generally, do not pay income tax, so there is no double taxation on dividends (i.e. for a traditional stock, the company pays income tax before the dividend, and then the investor has to pay tax on the dividend).

Cash flows: The contractual nature of lease income, transparency, and disclosures make for earnings estimates; rarely does one tenant account for more than 1% of the rental revenues in a portfolio.

Potential avenues for growth: REIT portfolios consist of income-producing properties which can grow via occupancy and rental increases, re-tenanting, and redevelopment/expansion.

Diversification: REITs have 14 different property type sectors spread across the country.

Areas of Opportunity

  • Historically low new supply of competing properties has made for an elongated cycle favoring landlords and their ability to increase rents.
  • External growth opportunities include development and acquisitions.

General Market Risk:  Investing in securities is subject to risk, including the possible loss of principal invested.  In general, a security’s value is affected by activities specific to the company as well as general market, economic and political conditions.

Risks of investing in REITs:  In addition to the risks associated with securities of companies participating in the real estate industry, such as declines in the value of real estate, risks related to general and local economic conditions, decreases in property revenues, and increases in prevailing interest rates, property taxes and operating expenses, REITs are subject to certain other risks related to their structure and focus. REITs are dependent upon management skills and generally may not be diversified. REITs are also subject to heavy cash flow dependency, defaults by borrowers and self-liquidation. A REIT could possibly fail to qualify for favorable U.S. federal income tax treatment and so become subject to additional income tax liability that could cause to liquidate investments, borrow funds under adverse conditions or fail, or to maintain its exemption from registration under the Investment Company Act of 1940 (“1940 Act”). Various factors including the above may also adversely affect a borrower’s or a lessee’s ability to meet its obligations to the REIT. In addition, the REIT may experience delays in enforcing its rights as a lessor and may incur substantial costs associated with protecting its investments.