- "Cheap REITs Got Cheaper" was a prevailing theme of 2020. High-yield real estate ETFs and CEFs underperformed in 2020 on average, but there were a few strategies that proved resilient.
- High-Yield ETFs typically include a collection of misfits, outcasts, small-caps, and recent underachievers. CEFs add another dimension by utilizing leverage. Understanding the source of excess yield is essential.
- We stress that diversification is especially critical when "yield-chasing" to minimize elevated idiosyncratic risks, making real estate ETFs an efficient and low-cost option to complement a disciplined strategy.
- Funds that achieved excess yield by investing higher in the "capital stack" - through REIT preferreds and bonds - delivered stronger performance than funds that invested exclusively in common stock.
- In this report, we take a deep dive into six higher-yielding real estate ETFs and eight real estate CEFs that offer an array of different strategies, risks, and opportunities.
For further details see:
High-Yield REIT CEFs And ETFs: No Free Lunch