While the media continues to fill the real estate news with grim data about decreased home sales and increased foreclosure rates in recent months, real estate funds, which typically invest in commercial property and multifamily housing, have soared. Based on Lipper, the 251 domestic real estate funds that it tracks have returned 55.7 percent over the past two years. Now compare that with 31.2 percent for diversified equity funds. Another research company, Morningstar, reported that real estate funds returned 6.1 percent in the first quarter of 2011, compared with a 5.1 percent average gain for all stock funds.
Before we start making conclusions and comments about this, we need to understand that these real estate funds have been able to outperform the average general equity fund at least in part because they did so much worse in the most severe part of the downturn. Commercial real estate for the most part hit the hardest during the heart of the financial crisis. On average commercial real estate investments lost two-thirds of their value in less than six months and some real estate funds ended 2008 with losses of more than 50 percent. What I want us to focus from this is that even on a down market there is opportunities. The managers of these funds did not give up, they reinvented themselves and went back into the market and now they are providing returns that surpass anybodies expectations. While most people are home scared of the real estate market, suffering of paralysis; these funds analyzed the situation and took action.
Here are two of these real estate funds;
1. Alpine Realty Income and Growth fund, which returned 9.24 percent in the quarter, making it the top-performing real estate fund among those tracked by Lipper.
2. Ivy Real Estate Securities returned 5.7 percent in the first quarter after a 28 percent gain in 2010.
Like any real estate investment, you must proceed with caution and seek professional help.
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