The FTSE® EPRA®/NAREIT® Global Real Estate Index returned 1.92% during the third quarter. Real estate securities underperformed relative to the 7.90% return of the broader global markets, as measured by the MSCI All-Country World Index. Predictions that the U.S. Federal Reserve would begin to taper its asset purchase program in September drove investors away from high yielding securities and asset classes that offer inflation protection. Global real estate securities regained some ground in September, when the Fed announced that it would not begin tapering, causing yields to drop.
The Global Real Estate Index Fund posted a return of 2.20% for the quarter.
U.S. real estate securities returned -3.02%, well short of the return for international real estate securities. The primary reason for the shortfall was the continued increase in long-term U.S. Treasury yields. Emerging markets fared slightly better during the quarter, while developed international real estate generated the best performance. Developed-market international and emerging market real estate securities returned 7.45% and -1.09%, respectively. Emerging market stocks, in general, remained under pressure from concerns regarding slower economic growth in key economies such as China, India and Brazil, as well as the possibility that central banks may be compelled to raise interest rates. However, signs of improving growth in Europe, together with Japans exceptionally accommodative monetary policy, boosted the performance of developed-market international stocks.
- Seek to duplicate the investment composition and overall performance of the stocks included in the FTSE®EPRA®/NAREIT® Global Index.
- Invest at least 80% of its net assets in equity securities in the Index, in weightings that approximate the relative composition of the Index.
- Use proprietary quantitative techniques designed to minimize trading costs.