Portfolios which include international real estate investment trusts (REITs) can deliver superior risk-adjusted returns when compared to a portfolio without international property, according to the new research from VanEck.
The study stressed investors typically earn income from rent which means that REITs could provide a regular income stream to investors, even during an economic downturn.
Secondly, Australian investors traditionally only invested locally even though investments in international REITs offered important diversification benefits and superior risk-adjusted returns.
According to VanEck’s managing director and had of Asia Pacific, Arian Neiron, by including international REITs investors could see higher annualised portfolio return, without incurring significant risk as measured by standard deviation.
“Moreover, the long-term fundamentals for selecting real estate investments are robust. Restricted funding has limited supply and with improving demand, strong rental growth has emerged. We expect this trend to continue in many markets and sectors around the world, particularly in developed markets,” said Neiron.
“REIT balance sheets are in a good shape. Since the GFC, the REIT industry has reduced leverage and extended maturities of debt instruments to lock-in low interest rates.”