Top 3 Inexpensive Global Real Estate Mutual Funds For 2017

The real estate sector is beginning to show signs of coming out of its recent downturn as persistently low mortgage rates, an improving world economy, and domestic reconstruction efforts in both Texas and Florida are acting as the catalysts for the sector. On the domestic side, the Federal Housing Finance agency recently reported that mortgage rates for newly built homes was up just 7 basis points in August to +4.01%, almost at historic lows.  Also, total mortgage applications rose by +13% when you excluded both Texas and Florida.  But in these two states new building construction, and reconstruction efforts have caused home building stocks to jump over the past few days.  

The sectors growth and stability is not just occurring in the U.S., according to the International Monetary Fund (IMF), “The pickup in global growth anticipated in the April World Economic Outlook remains on track, with global output projected to grow by 3.5 percent in 2017 and 3.6 percent in 2018.” Further, it was recently reported that 18 out of 23 housing markets in Europe saw double digit growth.  Moreover, growth in Asia, and India is expected to be almost double the current IMF global growth expectations.  

What we looked for    

By investing in mutual funds with global reach you limit any unforeseen downturn in any one market.  So in order to capitalize on the global Real Estate sector uptick, we utilized the Zacks mutual fund screener to identify the best funds with specific characteristics.  First, the fund had to have a Zacks Rank #1, Strong Buy rating.  Second, they had to have an expense ratio below 1.1 with no load fees, or redemption fees.  Third the fund had to have significant exposure to real estate stocks in developed markets throughout the world.  Lastly, they had to have a history of success, and be maintained by a top fund manager.

The Picks

CGM Realty Fund (CGMRX) was incepted in May 1994 and is managed by Capital Growth Management Limited Partnership. The fund seeks to provide a combination of income and long-term growth of capital. The fund invests at least 80% of its assets in these securities. The fund pays dividends quarterly and capital gains annually.

Cost Specifics: The minimal initial investment is $2,500, it has a 0.81% management fee, no load or redemption fees, and has a total expense ratio of 0.98.

Performance and Management: YTD return +17.31%. 1 year +24.42%, 5 year +9.41%, and 10 year +6.89%.  Ken Heebner, CFA is the portfolio manager and he has managed CGM Realty Fund since its inception in 1994. Mr. Heebner holds an MBA from Harvard Business School.  

Top Holdings: As of the most recent filings, the top 5 positions are held in Vale SA, Bank of America, Freeport-McMoRan, Toll Brothers, and NVR Inc.

Janus Henderson Global Real Estate Fund (JERTX) seeks to provide investors total returns – both capital appreciation and current income – associated with global real estate growth and development. The Fund seeks to own a portfolio of the most compelling real estate equities listed on regulated exchanges throughout the world. These companies will derive the main part of their revenue from the ownership, management and/or development of real estate.

Cost Specifics:  The minimal initial investment is $2,500, it has a 0.75% management fee, no load or redemption fees, and has a total expense ratio of 1.07.  

Performance and Management: YTD return +13.01%, 1 year +7.65%, 5 year 8.59%.  JERTX is managed by both Guy Barnard, CFA, and Tim Gibson.  Guy and Tim are co-heads of Global Properties Equities at Janus Henderson.  

Top Holdings: As of the most recent filings, the top 5 positions were held in Aroundtown Property Holdings, Simon Property Group, Equity Residential, China Resources Land, and Sun Hung Kai Properties

Schwab Global Real Estate (SWASX) seeks capital growth and income consistent with prudent investment management. The fund invests at least 80% of its net assets in securities of real estate companies and companies related to the real estate industry. It invests in equity securities, primarily common stocks.

Cost Specifics: The minimal initial investment is $100, it has a 0.77% management fee, no load or redemption fees, and has a total expense ratio of 1.05.

Performance and Management: YTD return +13.22%, 1 year 5.81%, 5 year 8.12%, and 10 year 2.68%.  SWASX is managed by Jonas Svallin, CFA, who is a Vice President and Head of Active Equities for Charles Schwab Investment Management.  

Top Holdings: As of the most recent filings, the top 5 positions were held in Equity Lifestyle Properties, Simon Property Group, CapitaLand, Apartment Investment & Management Co, and Cheung Kong Property Holdings.

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