In this series, we’re looking at three US real estate equity funds: the T. Rowe Price Real Estate Fund (TRREX), the Cohen & Steers Realty Shares (CSRSX), and the Fidelity Real Estate Investment Portfolio (FRESX). The one-year average annual return ended August 31, 2015, for these three funds are comparable.
Average annual returns for the T. Rowe Price Real Estate Fund (TRREX) and the Cohen & Steers Realty Shares (CSRSX) were 2.41% and 2.33%, respectively. The return for the Fidelity Real Estate Investment Portfolio (FRESX) was 1.39%. The returns are lower compared to the average annual return over three-year and five-year periods of the funds.
For example, the average annual return of TRREX for the three-year period is 8.98% and 14.53% for the five-year period. The returns are disclosed by the respective fund issuers and are taken from the respective fund’s website. The top three holdings of FRESX as of June 30,2015, were Public Storage (PSA), Simon Property Group (SPG), and Host Hotels & Resorts (HST).
Price movements are in mutual sync
All three funds—the T. Rowe Price Real Estate Fund (TRREX), the Cohen & Steers Realty Shares (CSRSX), and the Fidelity Real Estate Investment Portfolio (FRESX)—have followed the same line in terms of price movement. The funds’ similar price movements further emphasize the strong correlation of the real estate funds with the macroeconomic factors rather than only intrinsic factors.
Comparing the week-over-week price variation for the last five years, the relative standard deviation, also called the coefficient of variation, in the prices is very comparable. Relative standard deviation (or RSD) is used to compare the volatility of the prices. Standard deviation can be defined as the deviation of the data points from the mean of the data set. RSD is the ratio of the standard deviation to the mean of the data set.
FRESX prices had an RSD of 18.1%. In a similar manner, CSRSX and TRREX had a relative standard deviation of 17.6% and 17.9%, respectively. The above graph shows the trend in the weekly price change over the last one year for the three funds. The similar movement of the prices of the funds can be attributed to the similar composition or similar exposure strategy.
The Carlyle Group (CG) is an alternative investment asset manager with almost $193 billion in assets under management across 128 funds and 142 fund of funds as of June 30, 2015.
YTD as of September 16, 2015, returns on an average annualized basis reflect the gloomy scenario of the real estate sector this year. FRESX returned -15.9%, CSRSX returned -20.5%, and TRREX returned -10.6% in the period.
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