High quality real estate in safe haven countries
Income, Growth and Diversification
Why add a foreign real estate component to your portfolio?
Real estate provides investors with income, growth and inflation protection. Investing in foreign real estate provides the additional benefit of both economic and currency diversification.
Why invest in the Safe Haven Real Estate Solution?
The available foreign real estate ETFs are cap-weighted and dominated geographically by Japan, Hong Kong and Australia (57% combined), and include many real estate operating companies that provide services but do not own hard assets, or are in challenged real estate sectors. Our solution differs from existing available Foreign REIT ETFs in four respects:
- Country focus is specific
- Asset focus is more selective
- Direct ownership avoids ETF fees
- A tactical country allocation overlay
- Actively managed - consideration for inflation protection, rising interest rates, diversification, liquidity and technological change.
The goal of the Safe Haven Real Estate Solution is to deliver stable dividend income in excess of US 10-year Treasury bond yields, plus capital preservation, growth, inflation protection and diversification for US based investors.
Our solution is focused on Switzerland, Sweden, and Singapore. These three developed market economies have small, productive, wealthy populations and rank very highly on geopolitical risk, and global competitiveness. They have currency independence and an active real estate sector. In addition, they are also distinctly different geographies from each other, providing further diversification. Lastly, some companies in our focus countries own real estate in other countries outside of their home country, which provides added diversification.
- Our solution is focused exclusively on companies that own hard real estate assets - we do not wish to own service or operating companies that may not provide inflation protection or the same level of long-term sustainability.
- Asset quality should be of a higher than average quality; B+ and above.
- We believe certain asset types, such as some retail, are more susceptible to technological changes, for example, the shift to online shopping, so our retail will focus on tourist/transit based retail which is less at risk. In addition, we will have a significantly higher allocation to residential and hotel than index-tracking funds, which we believe are more resilient to technological change. Our target allocation will be an equal mix of office, retail, residential, hotel and other diversified real estate.
- Lastly, we prefer companies with good fiscal discipline and dividend payout history and fixed long-duration debt in place.
Below is our target allocations versus an index tracking fund.
Tactical country weightings
Our proprietary tactical developed country allocation model gives preference to countries whose relative real exchange rate is cheap and who are showing positive growth momentum. This process has been able to differentiate between future country performance over a 1 - 3 year period. We use this model to overweight or underweight each of our three countries.
Direct stock ownership
You will own shares directly in each portfolio company, so there is no additional layer of fund fees.
- The basic idea is that these are safe, dividend paying assets, like bonds, but with the added benefit of growth, inflation protection, and currency and geographic diversification.
- The focus is on higher yielding assets in countries with good growth outlooks and expectations for currency appreciation.