Real Estate Fund Swap

Real Estate Fund Swap

Yesterday we sold our long-term real estate holding, JP Morgan U.S. Real Estate (SUIEX) in all of our clients’ accounts.  We’ve replaced it with Cohen & Steers Institutional Realty Shares (CSRIX).

Since we first bought the JP Morgan fund in 2000 it has posted solid returns, annualizing almost 9% over the trailing 10-years (11/14/03 – 11/14/13).  But more recently it has struggled in terms of performance relative to the real estate category, and we decided it was time for a change.  As our long-time clients know, we’re not in the habit of jumping in and out of funds frequently, and short-term underperformance is usually not enough of a reason to fire a fund unless there is a deeper issue.  But we’ve been monitoring this situation for some time now, and feel that the change is in the best interest of our clients.  Our research, analysis, and due diligence on this fund and its competitors gives us confidence in our decision.

A little background on the new fund company:  Cohen and Steers is considered the pioneer in REIT investing.  In 1986, Martin Cohen and Robert Steers established Cohen & Steers as the first investment company to specialize in listed real estate, and launched the first open-end fund in 1991.  To this day, their primary focus and area of expertise is real estate.  As the largest real estate investment fund company in the country they have unprecedented access to the top executives of the REITs in which they are investing.

Cohen and Steers Institutional Realty Shares (CSRIX) is considered one of the finest real estate funds on the planet.  The investment objective of the Fund is total return through investment in real estate securities.  In pursuing total return, the Fund seeks both capital appreciation and current income with approximately equal emphasis.

It is an institutional fund that is only available to clients of Registered Investment Advisors.  There is a $3 Million minimum purchase requirement, and since we can aggregate our assets, the fund is available to all Financial Synergies’ clients.  The internal expense ratio of the fund is only 0.75%, one of the lowest in the entire real estate category.

Real estate continues to be an important asset class in our portfolios as both a diversifier and return enhancer.  REIT funds provide an efficient vehicle for investing in real property such as apartments, shopping malls, healthcare facilities, storage units, retail centers, etc.  These are properties the individual investor may not otherwise have access to.  As the economy continues to improve, the demand for these properties and what they have to offer should benefit, so we’re optimistic about the future of this asset class.

–Mike Minter

Source:  Morningstar Direct

Mike Minter

Mike Minter

Mike develops investment portfolio allocations, handles trading and rebalancing, and conducts research and analysis as a Portfolio Manager and Financial Advisor for the firm. As a perpetual student of investing and the markets, Mike considers himself obsessed with the subject. Mike has earned the CERTIFIED FINANCIAL PLANNER™ (CFP®) and Certified Fund Specialist® designations. He is also an active member of the Houston chapter of the Financial Planning Association (FPA).

 
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