Global REITs Ex-US Have Returned 14 Times More Than US REITs 1

Global REITs score big in price return

The Vanguard Global ex-US Real Estate ETF (VNQI) offers exposure to global real estate markets (Global REITs), excluding the US (VNQ) (IYR). The ETF has 84% of its portfolio allocated to the developed markets (excluding the US) and another 16% to emerging markets (EEM) (VWO).

As is reflected in the chart above, the VNQI ETF has returned about 16% so far this year (as of June 3), as compared to the US real estate-tracking Vanguard REIT ETF’s (VNQ) 1.14% return; that is, global REITs have delivered returns equivalent to 14 times US REITs.

Charles Schwab, Wells Fargo (WFC), and Valmark are among the top three institutional investors in the VNQI presently with about 8.6%, 7.8%, and 3.6% ownership, respectively.

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Global real estate is cheaper

Global real estate funds are reaping more than US real estate-focused funds with double-digit returns so far this year. Moreover, valuations seem to favor global real estate, which is quite attractively priced, as compared to the US. As of June 5, the global VNQI was trading at a P/E (price-to-earnings) ratio of 12.07, while the US-focused VNQ was trading at 44.66 P/E. We will delve more into this in Part 3 of this series.

Global real estate offers high yields

Low-interest rates across the developed world (EFA) (VEA) have left many investors yield thirsty, and the VNQI offers high yields at low cost. Dividend yields across global real estate (ex–US) is above 3.5%. Dig a little deeper into specific markets, as you’ll find yields around 7%. The next part of this series highlights such markets.

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