RAAAX | RAAIX | RAANX
ALTEGRIS/AACA OPPORTUNISTIC
REAL ESTATE FUND
Diversifying your portfolio with real estate adds the potential for
attractive returns over time, current income, and inflation protection.
Real estate has long been considered an alternative investment strategy because of its low or negative correlation to other income-generating assets. No doubt, real estate’s current bull market has been a boon to savvy investors who’ve made an allocation to the asset class.
And now that the S&P Dow Jones and MSCI indices have established a new real estate sector based on changes in the Global Industry Classification Standard (GICS®), Real Estate Investment Trusts (REITs) should receive more attention from investors. Altegris believes that making room in a portfolio for REITs still makes sense, and that the current bull market may still be intact.
Past performance is not indicative of future results. The referenced index is shown for general market comparisons and is not meant to represent any particular Fund. An investor cannot invest directly in an index. Moreover, indices do not reflect commissions or fees that may be charged to an investment product based on the index, which may materially affect the performance data presented. Source: REIT.com
REITS: ESSENTIAL ASSETS FOR A CUSTOMIZED PORTFOLIO
Bonds and REITs are at opposite ends of the efficient frontier. Asset mixes of bonds, REITs and stocks along the frontier provide opportunities for customized reward-to-risk ratios that may suit a wide variety of investors.
Past performance is not indicative of future results. There is no guarantee that any investment will achieve its objectives, generate profits or avoid losses. Returns are represented by benchmark indices for general market comparisons and are not meant to represent any particular investment. Portfolio allocations will vary depending on the investment objectives, risk tolerances and experience of the individual investor.
Date range based on common period of data availability. An investor cannot invest directly in an index. Moreover, indices do not reflect commissions or fees that may be charged to an investment product based on the index, which may materially affect the performance data presented.
Indices: REITs: FTSE NAREIT Equity Total Return Index; Stocks: S&P 500 Total Return Index; Bonds: Barclays US Aggregate Bond Index. Standard deviation is a statistical measure of how consistent returns are over time; a lower standard deviation indicates historically less volatility. Source: AACA based on data from Bloomberg; Pertrac based on data from S&P.
REIT returns have, for the most part, outstripped equities over time. Equities are traditional portfolio mainstays because their growth potential provides an inflation hedge. But when you look back over time, REITs have actually been more reliable as producers of real returns when compared to equities.
In the past 20 years, REITs’ annualized return has exceeded that of the S&P 500, gold, and bonds, among other assets.
Comparison of annualized returns for various asset classes and inflation from 12/1/1996 to 11/30/2016.
Past performance is not indicative of future results. There is no guarantee that any investment will achieve its objectives, generate profits or avoid losses. Returns are represented by benchmark indices for general market comparisons and are not meant to represent any particular investment.
Data prepared by AACA, compiled from Bloomberg. Indices: REITs: NAREIT Equity REIT Total Return Index; S&P 500: S&P 500 Total Return Index; Gold: Gold price in USD per troy ounce; Bonds: Barclays US Aggregate Bond Index; Homes: Case Shiller 10-City Index; Emerging Markets: MSCI Emerging Markets Index; Inflation: Consumer Price Index.
The Altegris/AACA Opportunistic Real Estate Fund (RAAAX, RAAIX, RAANX) offers investors a way to capitalize on real estate opportunities across a wide swath of REIT segments. The Fund’s subadvisor, American Assets Capital Advisors (AACA), is a specialist focused on properties in which tenant turnover is low.
AACA’s portfolio manager doesn’t follow the crowd. Instead, AACA goes where more traditional REIT investors won’t — to sectors populated by few competitors, into markets with high entry barriers, where tenants have practical, locational or physical issues that prevent them from moving and where the tenants or users are experiencing strong secular growth.
Data centers and cell phone towers, segments that currently make up a third of the Fund’s portfolio, are prime examples of AACA’s “off-index” approach. These segments are overweighted in the Fund because they’re driven by massive demand. Out-of-favor segments may be underweighted. To take full advantage of its in-depth real estate research, AACA also may hedge exposures by “going short” the least attractive sectors at a given time.
The Fund’s asset allocations and security selections are determined through AACA’s deep analytical research. REITs trading at discounts to their net asset values may be attractive buying targets.
AACA’s manager believes the United States is in the “middle innings” of a real estate recovery. Going forward, as new supply is added to the market, AACA looks forward to trimming the Fund’s long positions while adding to its short side.
1 Reflects exposure adjusted for options/derivative holdings.
Past performance is not indicative of future results. Portfolio holdings and exposures are subject to change and should not be considered investment advice. The Fund also holds cash and cash equivalents which are excluded from the allocation of net assets shown.
REITs have historically exhibited a fairly high correlation to equities and a modest correlation to bonds.2 Because of this, Altegris believes that real estate fits into an investor’s portfolio as an alternative equity exposure. REITs, in particular, may provide:
Diversification Value: Adding real estate to a portfolio could potentially reduce the volatility of returns and may enhance overall performance.
Inflation Protection: Real estate returns are directly linked to the rents received from tenants. Real estate income may increase faster in inflationary environments, which would allow investors to maintain real returns. As real estate securities are backed by physical assets, they’ve historically served as inflation hedges and may provide increasing value over time.
Yield Enhancement: As of December 31, 2016, REITs, proxied by the FTSE NAREIT All REITs Index, produced a current yield of 4.34%. Compared to the 2.10% yield of the S&P 500 TR Index and the 2.44% yield for the 10-year Treasury note on the same date, real estate offers relatively attractive current income potential. This income is an important component of total return in REITs.
Liquidity: Unlike buying and selling traditional real estate, publicly-registered real estate securities are highly liquid and easily traded, with comparatively low transaction cost.
Source: Altegris, AACA
2 For the 10-year period ending 12/31/16, REITs’ correlation to stocks is 0.76 and 0.27 to bonds. Source: Bloomberg.
Past performance is not indicative of future results. There is no guarantee that any investment will achieve its objectives, generate profits or avoid losses. Current yields are for general market comparisons and are not meant to represent any particular investment.
Indices: REITs: FTSE NAREIT All REITs Index; Stocks: S&P 500 Total Return Index; Bonds: Barclays US Aggregate Index.
MORNINGSTAR RATING
Class I shares overall rating out of 225 real estate funds as of 6/30/2017.
Fund Information
More information including the performance current to the most recent month-end can be found on the Fund homepage.
GO NOWQuarterly Factsheet
Advisor Guide
Client Guide
Outside the Boxes
Blog: Insights from investment experts