AVRE targets real estate companies trading at attractive valuations relative to their profitability, applying Avantis's systematic value approach to REITs and real estate operating companies. The fund aims to capture the real estate risk premium while avoiding the most expensive names in the sector.
How It Works
The strategy screens global real estate securities for high profitability metrics relative to price, overweighting REITs with strong cash flows trading at discounts to their earnings power. It maintains broad diversification across property types including residential, industrial, retail, and office REITs, while systematically underweighting or excluding companies with poor profitability or excessive valuations. The portfolio rebalances quarterly to maintain its value tilt.
Key Features
- Global reach including developed and emerging market REITs, not just US property exposure
- Systematic value tilt targets REITs trading cheap relative to funds from operations
- Broader than typical REIT funds — includes real estate operating companies and developers
Risks
- Interest rate sensitivity can crush valuations — 100bp rate spike historically meant 10-15% REIT declines
- Commercial property distress could trigger 30-40% drawdowns as seen in 2008 and March 2020
- Value tilt may underperform growth REITs like data centers and towers in tech-driven markets
Who Should Own This
Best for investors seeking inflation-hedged income who believe the market systematically misprices boring property types like apartments and warehouses versus flashy growth REITs. Works as a 5-10% portfolio allocation for those comfortable with equity-like volatility in exchange for yields 200+ basis points above the S&P 500.