In today’s segment, I’m going to talk about how to incorporate some concepts from hedge fund investing into the talk we just had last week, but first you need to remember what I reported on REIT returns last Saturday.
If you buy all the REITS in the stock market and rebalance your purchases annually for the past 10 years, you would expect to earn about 8.3%. Generous returns by any standard as the STI could barely stretch 5% during that same period of time.
Suppose you then buy 50% of the REIT universe which gives higher yields, you would do 1.15% better or earn a return of 9.45%. It does not take much mathematics to figure out that the lower yielding REITS would return 1.15% less than the average at 7.15%.
A hedge fund manager with a prime broker might be able to structure a …