Real Estate Investment Trust (REIT) Funds

Real Estate Investment Trust (REIT) Funds are real estate securities similar to stocks. They are an important asset class for a diversified portfolio and are a great way for smaller investors to get involved in real estate investments. There are many REITs and real estate focused hedge funds currently in the market place. Individuals can invest in REITs in two ways. They can either invest in a mutual fund that specializes in real estate, or they may purchase REIT shares directly on the open exchange. The Enfinium Real Estate Managed Account is ideal for any investor looking to generate a positive return in both a rising and falling market.

As discussed in detail below real estate hedge funds and real estate securities are not highly correlated to the stock market, that is, REITs tend to not always trend with the stock markets. Some REIT securities specialize in certain areas of real estate. Others invest only in real estate that is located in a certain part of the country. Among other things, real estate investment trust funds invest in apartments, warehouses, malls, office buildings, and hotels.

Advantages of REIT Funds & Real Estate Hedge Funds

The main reason American citizens invest their money into a REIT or real estate hedge fund is to create a tax break. This is because real estate securities are required to pay a very small amount of income tax. Real estate investment trusts are required to distribute at least 90% of their annual income to shareholders as dividends. This results in a typical dividend yield of at least 6% for investors.

Another important factor for REIT funds and real estate hedge funds is they tend to have a negative correlation with the stock market. In general that means that real estate securities and the stock market tend not to move in unison. For example whilst REIT securities suffered in the late 1990s, they rallied during the bear market that began in 2000. In turn this means a real estate hedge fund would provide a certain amount of much-needed diversification to the average investors' portfolio. As a result, this lack of correlation can help boost your overall returns, especially when the stock market is performing poorly.

Another point to consider is that a real estate security is often considered a stable investment. This is because REIT's reflect a property portfolio and investors like to invest in property as they are made of bricks and mortar and are tangible. A REIT fund will try mirror an investment which has existed for a long time and will continue to do so. Real estate hedge funds and real securities allow for individual investors a more affordable way to invest into property. A real estate fund will attempt to reflect a physical property investment without any of the expenses and legal issues we face when directly buying a property.

Disadvantages of REIT Funds & Real Estate Hedge Funds

The main disadvantage of REITs is the reinvestment of capital into the real estate trust, or the lack of. This is because funds are returned to shareholders in the form of dividends.

Finally, although they're considered more stable than many other types of investments, REITs are not set in stone. Changes happen, and if the stock market is taking a major downward turn your REIT will most likely be affected. Keep in mind, too, that the real estate market experiences changes as rentals and purchases go through supply and demand. These things can all affect the rate of return on REITs.

REIT Funds & Real Estate Hedge Funds Summary

In summary a REIT can invest in a wide variety of real property including shopping malls, office complexes, apartment buildings or hotels. A real estate hedge fund can then take speculative positions in real estate securities. The Enfinium Global Macro FreeStyle Real Estate Fund can also take short positions in real estate funds. This means that not only can we benefit in a rising market, but we can also generate positive returns in a falling real estate market. Investing in the Enfinium Real Estate Managed Discretionary Account is a great investment for any investor looking to generate a positive return in both a rising and falling market.

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