Put global real estate on your radar

Until recently, global real estate was an exotic asset class, off the radar screen of U.S. retail investors. Information was scarce. And few global real estate stocks are listed on U.S. exchanges.

That changed with the advent of global real estate exchange-traded funds such as Vanguard Global ex-U.S. Real Estate Index Fund (VNQI).

VNQI is not a bet on a single stock in a single country. Instead, the fund seeks to replicate the S&P Global ex-U.S. Property Index, a benchmark that includes REITs and real estate operating companies (REOCs) in emerging and developed markets outside of the US.

So, when you invest in VNQI, you are investing in 440 individual securities from 35 different markets, including Japan, Hong Kong and the United Kingdom.

Coincidentally, VNQI�s regional allocation pretty much tracks the composition of Knight Frank/Citi study�s top ten cities list, which found that six out of the top ten cities for real estate are based in Asia. That just about matches VNQI�s 56% weighting in the region.
VNQI�s 20.7% weighting in Europe correlates almost exactly with London and Paris, which both are in the top ten. Its top five holdings together account for 16.2% of the fund�s assets.

• Mitsubishi Estate Co. Ltd. is Japan�s second-largest real-estate developer and is involved in property management and architecture research and design.
  
  
• Westfield Group (Australia) is the world�s largest retail property group by market cap. It has interests in 124 shopping centers across Australia, the US, UK, New Zealand and Brazil.
  
  
• Sun Hung Kai Properties Ltd.� is one of the largest property companies in Hong Kong and has the highest credit ratings among Hong Kong developers.
  
  
• Cheung Kong Holdings Ltd. is one of the largest developers of residential, office, retail, industrial and hotel properties in Hong Kong. About one in 12 of the private residences in Hong Kong have been developed by the company.
  
  
• Headquartered in Paris, Unibail-Rodamco SE is the largest commercial real estate company in Europe. It owns 76 shopping centers in 12 European countries.

Although foreign real estate is not an asset class you probably invest in, some of the smartest money in the world does � including the Harvard endowment.

At my investment firm, Global Guru Capital, I run the �Ivy Plus� Investment Program � an investment strategy that replicates the asset-allocation strategy of the Harvard endowment.

Among 17 asset classes in which it invests, which one has been the top performer of 2012? You guessed it... foreign real estate, which is up 23.31%.

VNQI's expense ratio is only 0.35%, which makes it the cheapest fund in its sector. VNQI also boasts an attractive yield of 4.04%. I�ve given this a low-risk rating.



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