Last month, the overseers of the S&P 500 index split real-estate companies from financial stocks, creating an 11th equity category in response to the growing size and outperformance of the sector in recent years. Investors, though, should ask themselves if this is the property market’s equivalent of shoe-shine boys giving stock tips.
Against a background of record-low interest rates, $62 billion flowed into U.S. real-estate funds from 2001 through 2015, with more than 120 Real Estate Investment Trusts going public and raising more than $38 billion. There are now 240 REITs listed on the NYSE and Nasdaq exchanges, with the real estate sector accounting for 3 percent of the S&P 500’s market capitalization.
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