Reitsmarket, a Luxembourg specialist boutique in global real estate investment trusts (Reits) solutions, has collaborated with Euronext for the launch of two new smart beta indices, the Euronext Reitsmarket Global Conviction Index and the Euronext Reitsmarket Global Balanced Index, which offer exposure to an investable portfolio of 30 and 40 Reits, respectively.
The company has signed a contract with a major investment bank who will soon start issuing products linked to both indices, and these products will also include structured products, according to Benedict Peeters (pictured), CEO, Reitsmarket.
“Both indices are global,” said Peeters. “They offer access to liquid Reits and are designed to track listed real estate securities worldwide using a multi-factor ranking methodology and risk optimisation techniques for the selection of the portfolio constituents,” said Peeters. The Global Balanced Index is a balanced composition between Europe, US and developed Asia Pacific, according to Peeters. “Developed Asia Pacific because Emerging Markets have not been implemented in the index. I do see opportunities there but the market is highly volatile and there is limited issuer control, so I don’t want to recommend it to investors just yet.”
The other solution, the Global Conviction Index, uses the same universe but the weight per region, between Europe, US and Asia Pacific can vary, according to Peeters. “Only three out 30 shares need to be from one of the regions, so the model can decide to do overweights or underweights on a regional level.”
The indices have been live since October 5, 2017 and are administered and calculated by Euronext which is also responsible for the day-to-day management and dissemination. “Euronext is a highly reputed party and is clearly a movement maker in the market,” said Peeters. “Since we believe that interest from investors in Belgium and the surrounding countries will represent an important part of the distribution, we wanted to work with a partner that is prominently present in this region.”
Reitsmarket was founded by Rego Partners, a Belgian financial firm owned by Peeters and Christophe Pecoraro, both formerly of Finvex (Brussels based consultancy which specialises in the design of advanced investment strategies). “Reitsmarket is a new subsidiary we have set up,” said Peeters. “It is a separate entity we have created for the intellectual property of the real estate research that we do and we wanted to segregate this from our other activities.
“When you look at the asset class real estate, and the research about this, the most interesting part for me is the past performance,” said Peeters. “Global, US and Europe listed real estate all get top rankings when it comes to returns, both long-term and medium-term. It is just a very good asset class to own,” he said.
The company has analysed the whole market, “stone for stone”, and that has resulted in a research report, according to Peeters. “There is decorrelation with the traditional asset classes, not always but to a considerable degree. There is diversification, it is a liquid market and it is a large market,” said Peeters who noted that real estate has become a separate GICS (Global Industry Classification Standard) sector recently.
According to Peeters, today investment portfolio’s focus on equity and bonds. “Next to that you can buy real estate and often people access that asset class via the purchase of an apartment or a house. But investors can also access the asset class real estate in a liquid manner,” said Peeters. “Liquid real estate belongs in every portfolio. The historical performance speaks for itself. Of course, there is certainly volatility, but the multi-factor approach aims to deal with this element.”