The Goldman Sachs Future Real Estate and Infrastructure Equity ETF (GREI) debuted last November, making it one of the newer faces on the real estate exchange traded funds block.
More important than GREI’s rookie status is that the actively managed Goldman Sachs ETF offers investors a fresh approach to equity real estate investing — one that’s relevant today while holding long-term potential.
As experienced investors know, the real estate sector is often prized for favorable income prospects. For its part, GREI adds to that proposition with futuristic infrastructure exposure. That also shores up the fund’s inflation-fighting potential, which is sturdy given real estate’s track record on that front. Of course, there’s also the issue of interest rate sensitivity.
“Over the past decade, REITs have provided a dividend yield that is approximately 1.5% higher than the available rate on the U.S. 10-year Treasury,” wrote Morningstar analyst Kevin Brown. “While the spread jumped during the first year of the pandemic as the Federal Reserve lowered interest rates to stimulate the economy while the drop in share prices increased REIT dividend yields, the sector returned to the historical average spread in the second half of 2021.”
Home to 50 stocks, GREI isn’t your grandfather’s real estate ETF. Rather, the Goldman Sachs fund leans into growthier real estate investment trusts (REITs). Think data center, cellular communications tower, and industrial REITs. Relative to old-guard REITs, those are lower-yielding fares, but that could work in favor of GREI investors as the Federal Reserve continues boosting interest rates.
“With further interest-rate increases expected through the year, we anticipate that share prices may see further downward pressure as income-oriented investors rotate out of the sector. However, we believe cash flows should continue to benefit from high inflation through the back half of the year as many companies still anticipate record levels of growth in their 2022 outlooks,” added Brown.
Additionally, confirming there are benefits to active management and that it is indeed unique in this category, GREI isn’t entirely allocated to the real estate sector. That group represents “just” 52.3% of the fund’s weight. A 28.5% weight to utility stocks not only enhances GREI’s income profile, but it gives the fund some exposure to the renewable energy transition as well.
Industrial and communication services stocks combine for 13.6% of the ETF’s roster.
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