REITs are set to get a big boost when they’re spun off from the S&P Dow Jones Indices’ financial sector and given their own sub-sector on Sept. 16.
Cohen & Steers’ Thomas Bohjalian tells SeekingAlpha the move will send ripples throughout the entire investment community, noting three positive impacts for REITs.
It’ll increase demand, because US equity funds are underweight and would need to purchase over $100B of REITs just to stay market-neutral. Second, he says, it’ll reduce REITs' volatility, by separating them from the frothier financial sector.
Third, it’ll give REIT specialists a leg up, because REIT analysis requires unique valuation metrics most generalists aren’t well-versed in. A total of 90 REITs will occupy the new real estate sub-sector.
Howard Silverblatt, senior analyst at Dow Jones, says the change will highlight REIT’s healthy average yield of 3.46%, cutting the financial sector down to 1.98% from 2.25% in the process. [SA]
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