FlexShares Blog

Should Real Estate Investors Go Global?

Posted by FlexShares on May 22, 2017 11:43:22 AM

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Why Invest in Real Estate?

History shows that real estate can offer intrinsic value and income potential for many investors. We believe investors use this asset class as an integral part of a robust portfolio risk management strategy. Need a hedge against long-term inflation? Real estate has often demonstrated its effectiveness, along with common stocks, in helping investors achieve this goal. Due to low correlation (i.e. linkage or dependency) with securities, we believe real estate can be used for portfolio diversification to provide access to income growth.

Finding and developing quality properties may require an extensive commitment of capital and time. Challenges increase when prudent investors want to avoid geographic concentration. Global investment may help spread risk across economies, but there are obstacles to purchasing in other countries. Knowing these risks and planning for them is key.

Real Estate Investment Trusts (REITs)

Smaller investors can obtain liquid exposure to commercial or large residential real estate by purchasing common stock in real estate companies or shares in a real estate investment trust (REIT). REITs are investment corporations that comply with strict regulatory requirements, including:

  • investing at least 75% of total assets in real estate;
  • earning at least 75% gross income from property rents or interest on mortgages financing properties;
  • paying at least 90% of taxable income to shareholders in the form of dividends.

REITs may make it easier for investors to vary the property types and geography. By design, REITs are correlated with real estate holdings, instead of stocks and bonds. Note, however, if the REIT is a mortgage REIT or hybrid REIT, there could be some correlation with mortgage-backed securities.

Exchange-traded Real Estate

Exchange-traded real estate (RE ETFs) may deliver a cost-effective method for exposure to high-quality real estate. Investors may enjoy lower fees, transparency, and liquidity. RE ETFs may provide more diverse exposure to companies across markets than REITS or singular common stocks purchases alone. We believe for investors with long-time horizons, RE ETFs may provide enhanced total returns.

Investors seeking to optimize diversification may want to consider the global real estate sector. A global RE ETF may help disperse interest rate risk and political risk inherent in real estate across several economies. We believe the FlexShares Global Quality Real Estate (GQRE) ETF is a unique risk asset, designed to deliver a high-quality universe of broad base exposure.

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Can Global Real Estate Investing Work for Me?

FlexShares helps investors, whatever their goals, stay informed and make better investment decisions. We encourage you to learn more about The Case for Global Real Estate Investing.

Before investing, carefully consider the FlexShares investment objectives, risks, charges and expenses. This and other information is in the prospectus and a summary prospectus, copies of which may be obtained by visiting www.flexshares.com. Read the prospectus carefully before you invest. Foreside Fund Services, LLC, distributor.

An investment in FlexShares is subject to numerous risks, including possible loss of principal. Fund returns may not match the return of the respective indexes. The Funds are subject to the following principal risks: asset class; commodity; concentration; counterparty; currency; derivatives; dividend; emerging markets; equity securities; fluctuation of yield; foreign securities; geographic; income; industry concentration; inflation-protected securities; infrastructure-related companies; interest rate / maturity risk; issuer; large cap; management; market; market trading; mid cap stock; MLP; momentum; natural resources; new funds; non-diversification; passive investment; privatization; small cap stock; tracking error; value investing; and volatility risk. A full description of risks is in the prospectus.

FlexShares Global Quality Real Estate Index Fund (GQRE) is subject to real estate sector risk in addition to the general risk of the stock market. Investing in securities of real estate companies will make the Fund more susceptible to risks associated with the ownership of real estate and with the real estate industry in general, as well as risks that relate specifically to the way in which real estate companies are organized and operated. Real estate companies may have lower trading volumes and may be subject to more abrupt or erratic price movements than the overall securities markets. The value of real estate securities may underperform other sectors of the economy or broader equity markets. To the extent that the Fund concentrates its investments in the real estate sector, it may be subject to greater risk of loss than if it were diversified across different industry sectors. The Fund is also subject to the risk that its investments will be affected by factors that impact REITs and the real estate sector generally. Investing in REITs involves certain unique risks in addition to those risks associated with investing in the real estate industry in general. REITs whose underlying properties are concentrated in a particular industry or geographic region are also subject to risks affecting such industries and regions. By investing in REITs through the Fund, a shareholder will bear proportionate expenses of the REITs in addition to expenses of the Fund.

Topics: Funds


Before investing, carefully consider the FlexShares investment objectives, risks, charges and expenses. This and other information is in the prospectus, a copy of which may be obtained by visiting www.flexshares.com. Read the prospectus carefully before you invest. Foreside Fund Services, LLC, distributor.

An investment in FlexShares is subject to numerous risks, including possible loss of principal. Fund returns may not match the return of the respective indexes. The Funds are subject to the following principal risks: asset class; commodity; concentration; counterparty; currency; derivatives; dividend; emerging markets; equity securities; fluctuation of yield; foreign securities; geographic; income; industry concentration; inflation-protected securities; interest rate / maturity risk; issuer; management; market; market trading; mid cap stock; natural resources; new funds; non-diversification; passive investment; privatization; small cap stock; tracking error; value investing; and volatility risk. A full description of risks is in the prospectus. 
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