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Are REIT funds HOT?
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March 11, 1997: 6:32 p.m. ET
Mutual funds that focus on real-estate trusts are adding to 1996 gains
From Correspondent Carmine Gallo
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NEW YORK (CNNfn) - Looking to own a piece of the American Dream?
Many small investors are using mutual funds to invest in apartments, hotels and commercial office buildings.
The number mutual funds that invest in real estate investment trusts (REITs) -- publicly traded companies that own or develop properties -- more than doubled in the last two years.
REIT mutual funds yielded an average of 30 percent last year, beating the benchmark Standard & Poor's 500 stock index.
This year, REIT funds have gained ground despite a slow start, ranking among the five best-performing fund sectors in February, according to Lipper Analytical Services.
Some of the hottest REIT funds include Grandview (up 9.51 percent since Jan. 1); Evergreen U.S. Realty (up 8.97 percent); Longleaf Partners Realty (ahead 8.45 percent) and Morgan Stanley U.S. Realty (up 7.43 percent).
"I think the REIT market is a nice way to play the real-estate market," said Robert Froehlich, chief investment strategist at Zurich Kemper Investments. "One of the reasons (REITS have) become popular in the mutual-fund segment is that they give you a great way to diversify real-estate holdings across a much larger spectrum than you could get if you individually invest in real estate."
Still, REIT funds face potential pitfalls, such as higher interest rates or a downturn in the economy.
Yet Lipper Analytical's Michael Lipper and others say that while REIT funds might not match 1996's big returns this year, the investments could help many players get their foot in the door of the real-estate market. (155K WAV) or (155K AIFF)
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