What do you folks think about Japan REITs these days?
I'm still in the early stages of establishing a portfolio, mostly with some iDeCo and NISA so far, indexes and bonds per the general wisdom.
I didn't see any basic intro thread on REITs, but I was wondering about the ｅＭＡＸＩＳ Ｓｌｉｍ 国内リートインデックス in particular, as a means of further diversification.
Thanks! (And apologies in advance if my question is a little general. Just hoping to spur some discussion)
Wondering about Japan REITs?
-
bostoninvestor
- Probation (posts moderated and no PMs)
- Posts: 4
- Joined: Wed Jun 08, 2022 11:36 am
Re: Wondering about Japan REITs?
Adding REITS to your portfolio is an excellent decision as it will add a layer of diversification and potentially could help you generate excess returns for your portfolio as well.
The former Chief Investment Officer of the Yale endowment, David Swensen, used REITs to complement his portfolio, which helped him produce massive returns as he consistently beat the S&P 500. Having said that, he was investing during a time of falling interest rates and inflation while the current environment is one of rising interest rates and inflation.
REITS are backed by properties that use leverage, which works well in low rate environments, but that leverage can be a hindrance (depending on the composition of the debt) in a rising rate environment.
In Japan, the first JREITs became listed about 20 years ago with Nippon Bldg fund (8951) and JREIT (8952), which are primarily office REITs. However, since then, we’ve seen residential, multi-purpose, healthcare, logistic, and multi-family REITs all become listed as the sector has matured.
One interesting factoid is that Japanese regional banks (think Hokkaido Bank or Akita bank, etc) are big investors in REITs in Japan. This is because they generate a lot of excess reserves due to the fact that there aren’t enough good lending projects in rural Japan. Therefore, the banks’ investment committee will invest these reserves in JGBs, US Treasuries and you guessed it, JREITs.
Thus, the seasonality, or pattern of buying of REITs by the regional banks, is a significant driver for the share price of these names.
In addition, there are many JREIT ETF’s that investors can buy and because this buying is “passive,” it means that the JREIT index tends to see a lot of volatility in the last hour of trading.
I didn’t mean to get into the vagaries of JREIT trading, but if there is one sector in Japan that I would be very comfortable consistently dollar cost averaging into, it would be the JREITs. I haven’t looked at the JREIT ETF’s in a while, but I’d probably start by researching 1343, 1345, and 1476 as a start.
The former Chief Investment Officer of the Yale endowment, David Swensen, used REITs to complement his portfolio, which helped him produce massive returns as he consistently beat the S&P 500. Having said that, he was investing during a time of falling interest rates and inflation while the current environment is one of rising interest rates and inflation.
REITS are backed by properties that use leverage, which works well in low rate environments, but that leverage can be a hindrance (depending on the composition of the debt) in a rising rate environment.
In Japan, the first JREITs became listed about 20 years ago with Nippon Bldg fund (8951) and JREIT (8952), which are primarily office REITs. However, since then, we’ve seen residential, multi-purpose, healthcare, logistic, and multi-family REITs all become listed as the sector has matured.
One interesting factoid is that Japanese regional banks (think Hokkaido Bank or Akita bank, etc) are big investors in REITs in Japan. This is because they generate a lot of excess reserves due to the fact that there aren’t enough good lending projects in rural Japan. Therefore, the banks’ investment committee will invest these reserves in JGBs, US Treasuries and you guessed it, JREITs.
Thus, the seasonality, or pattern of buying of REITs by the regional banks, is a significant driver for the share price of these names.
In addition, there are many JREIT ETF’s that investors can buy and because this buying is “passive,” it means that the JREIT index tends to see a lot of volatility in the last hour of trading.
I didn’t mean to get into the vagaries of JREIT trading, but if there is one sector in Japan that I would be very comfortable consistently dollar cost averaging into, it would be the JREITs. I haven’t looked at the JREIT ETF’s in a while, but I’d probably start by researching 1343, 1345, and 1476 as a start.