Diversification & Potential Income in a Multi-Factor Approach
- Portfolio diversification potential. Investors seeking income and portfolio diversification may benefit from real estate investments. Our analysis suggests that global real estate has historically benefited from equity, credit and interest rate risk premiums*, while providing an alternative source of income that may be attractive in a low interest rate environment.
- Unique multi-factor approach. Applying the Northern Trust Quality factor analysis, we assess the financial health of each global real estate company and rank them based on their management expertise, profitability and cash flow. We then combine this Quality score with the Value and Momentum factors to target what our analysis suggests are undervalued real estate securities which have exhibited positive momentum relative to their peers.
- Potential alternative source of income. Global real estate may provide an alternative source of income to investors searching for yield in a low interest rate environment. Historically, our analysis suggests that dividend payments distributed by real estate investment trusts (REITs) have been attractive relative to equity dividends and fixed income coupons.
To learn more about how the FlexShares Global Quality Real Estate Index Fund (GQRE) attempts to achieve this in a rules-based process - download our white paper today.
* Risk premiums - equity, credit and interest rate - refers to the excess return that investing in a particular market provides over the risk-free rate. The risk-free rate represents the interest an investor would expect from an absolutely risk-free investment over a specified period of time. The excess return compensates investors for taking on the relatively higher risk of investing in that market.