What are we looking for?
A sense of how real estate equity funds fared in 2011, given that stock markets struggled during the year.
Some of the funds we examined invest mainly in Canadian real estate investment trusts (REITs), while others buy a mix of global real estate securities.
We ranked real estate equity funds by last year's performance. We limited our universe to those funds accessible to a large number of investors. U.S. dollar, segregated and duplicate versions of funds were also excluded.
What did we find?
Canadian REIT-focused funds rose to the top of the performance heap, fuelled by investors' obsession with finding yield in a low-interest rate environment.
Criterion REIT Income, one of the sector's smaller offerings, led the pack with a 21.5-per-cent return. It edged out the 20.8-per-cent gain by the iShares S&P/TSX Capped REIT ETF, and handily beat the 8.7-per-cent loss for the S&P/TSX Total Return Index.
"The smaller size of the fund certainly helps in terms of being nimble," said Lee Goldman of First Asset Management Inc. He has co-managed the fund with Chris Couprie since 2010. The pair also run $170-million in two closed-end REIT funds.
Winners in Criterion REIT Income included names such as InterRent, an apartment REIT that could eventually be a takeover target, Mr. Goldman said. Canmarc Real Estate Investment Trust (which is being acquired by another REIT), Brookfield Office Properties, Canadian Apartment Properties REIT, Canadian Real Estate Investment Trust REIT and Killam Properties also helped returns.
Even though REITs have had a nice run-up, Mr. Goldman remains positive on the sector, in part because of the U.S. Federal Reserve Board's decision to keep its key interest rate near zero until 2014.
Global real estate funds had a tough time last year and in most cases lost money. They started to bounce back this month with Manulife Global Real Estate posting a 9-per-cent gain to Jan. 25. Stronger-than-expected U.S. and Chinese economic data, and the European Central Bank's offer to provide more cash to euro-zone banks are helping to fuel more optimism about a global recovery.
HOW REAL ESTATE EQUITY FUNDS FARED IN 2011
|ASSETS||To Jan 25, 2012||To Dec. 31, 2011||Calendar year returns||To Dec. 31, 2011|
|FUND||MER||($ mil.)||YTD||1 year||2010||2009||2008||3 years||5 years||10 years|
|Criterion REIT Income Fund||2.5||4.25%||21.47%|
|iShares S&P/TSX Capped REIT Index||0.55||1310.2||1.31%||20.82%||21.84%||53.25%||-38.30%||31.15%||5.53%|
|BMO Equal Weight REITs Index ETF||147.3||3.62%||13.91%|
|CIBC Canadian Real Estate||2.89||48.8||4.01%||6.08%||23.43%||38.56%||-39.53%||21.97%||0.56%||8.69%|
|Dynamic Global Real Estate||2.46||229.9||3.76%||2.89%||11.39%||31.53%||-33.78%||14.66%||-1.24%||7.88%|
|Investors Global Real Estate A||2.72||55.7||4.82%||0.18%||14.39%||8.13%||7.41%|
|Claymore Global Real Estate ETF||0.74||16.0||6.26%||-3.13%||13.11%||11.79%||7.00%|
|INVESCO Global Real Estate-A||2.55||2.4||5.85%||-6.29%||9.81%||11.17%||-32.87%||4.59%|
|Mackenzie Univ World Real Estate Cl||2.64||34.9||3.48%||-6.45%||8.61%||12.68%||-39.72%||4.61%||-14.40%||0.77%|
|Desjardins Global Real Estate-A||2.71||3.8||6.06%||-6.83%||9.23%||17.22%||-36.74%||6.06%|
|Fidelity Global Real Estate A||2.58||15.4||6.32%||-7.01%||12.44%||16.77%||-36.19%||6.88%||-10.46%|
|AGF Global Real Estate Equity Class||3.29||13.8||6.97%||-7.66%||9.52%||19.15%||-32.98%||6.41%||-9.04%||2.64%|
|Renaissance Global Real Estate||1.9||5.68%||-8.31%|
|Manulife Global Real Estate||3.30||12.3||9.08%||-12.74%||9.85%||24.94%||6.19%|
|Middlefield ActiveIndex REIT Cl-A*||1.93||1.8||3.57%|
|S&P/TSX Total Return||5.03%||-8.71%||17.61%||35.06%||-33.00%||13.18%||1.30%||7.03%|
|*Launched in June, 2011. Source: Globe Investor, companies, Bloomberg|
© 2007 The Globe and Mail. All rights reserved.
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