Rampant real estate prices have prompted investors to invest in publicly traded funds that track the profits of the real estate industry.
Wall Street’s ETF sector has the best capital inflows since 2014, with nearly $ 3.9 billion added, according to data compiled by Bloomberg.
The BlackRock iShares US Real Estate ETF has already raised $ 2.5 billion in June, making it the best month ever. Another BlackRock fund, the iShares Global REIT ETF, is approaching its best month of inflows since 2017.
Historical stimulus from central banks around the world and an accelerating economic recovery are pushing prices up in all corners of the real estate market, fueling what some fear is becoming a bubble. As workers begin to return to the office, shoppers return to stores, and restaurants begin to fill up, the demand for a wide range of decorum grows.
As a result, real estate inventories rose sharply. For example, the Wilshire US Real Estate Index rose 49% from a pandemic low, including an 18% rise in the first half of this year.
“The returns in the real estate sector have been significant,” said Todd Rosenbluth, head of ETF and mutual fund research at CFRA. “Real estate is a sector that is closely associated with the recovery of the US economy as Covid begins to fade.”
Many of the products in this category, which are heavily invested in real estate investment funds, outperform the general indices. Funds from Vanguard and BlackRock are up about 20% this year, up from 13.6% for the S&P 500.
Mohit Bajaj, director of ETFs at WallachBeth Capital, said some of the inflow is also related to the pursuit of profitability at minimum rates.
“It looks like the Fed may raise rates, but not anytime soon, so real estate and housing companies should herald good times with lower interest rates,” he said.
Issuers rush to launch new products to capitalize on the boom. Janus Henderson Group launched an actively managed U.S. real estate ETF earlier this week, and recently American Century applied to create an Avantis Real Estate ETF under the ticker AVRE.
“They had lower returns, better profits and higher inflation in the second quarter,” said John Augustine, chief investment officer at Huntington National Bank. “When it comes to real estate, it’s kind of a triple disadvantage.”