If there’s such a thing as consistency in the capital markets in the 21st century, real estate investment trusts are the standard. Although the asset class has had its share of frights from time to time, REITs nonetheless managed to right themselves and post gains once the dust cleared.
The tendency to post returns in the black is again on display in 2006. So far this year, through last night’s close, REITs are up 9.30%, as per Vanguard REIT Index Fund. And as our chart below shows, REITs are also the leading asset class ranked by returns for the past month through yesterday. To find a calendar year in which REITs shed ground one has to go back to 1999, when the category retreated by 4.0%.
Asset class proxies: Vanguard REIT Index VIPER, iShares Russell 2000, iShares MSCI Emerging Markets, MSCI EAFE, S&P 500 SPDR, Vanguard High-Yield Corporate, PIMCO EM Bond, Morningstar Short Gov’t Category, PIMCO Foreign Bond, iShares Lehman Aggregate Bond, Vanguard Inflation Protected Securities, PIMCO Commodity Real Return.
Such consistency is otherwise unavailable in the competing asset classes, at least when considered through the prism of recent performance. Foreign developed government bonds (based on the dollar-hedged PIMCO Foreign Bond Fund) appear to be a close second, as our chart shows. Indeed, this asset class also hasn’t had a down calendar year so far in this century. But where the category stumbles is absolute total return. PIMCO Foreign Bond posts a 5.24% annualized total return for the past three years through yesterday v. a sizzling 18.6% for Vanguard REIT Index Fund.