March results underperformed the benchmark due to overweight allocations to the regional mall and shopping center sectors, as well as an underweight allocation to healthcare REITs. Contributors to relative performance included stock selection among the diversified and office REITs, as well as an overweight allocation to apartments.
REITs substantially outperformed the S&P 500 in March, however, the sector still has plenty of ground to make up. M&A chatter has increased over the past few months (WFD, GGP, LHO) and, with the sector still trading at significant discounts to NAV, we believe there could be catalysts to support a closing of the gap between public and private valuations.
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