B
y Tom Lauricella | Wall Street Journal
Investors have once again been piling into real-estate stock mutual funds, drawn in by their meaty dividend payouts.
But the yields on U.S. real-estate stock funds—2.6% on average for the Morningstar Inc. category—come with a risk that has burned investors before: vulnerability to rising interest rates.
Investors poured a record $12.4 billion into U.S. real-estate mutual funds and exchange-traded funds last year, topping the previous peak of $10.9 billion seen in 2012. Meanwhile, the average real-estate fund is up 31% over the past 12 months.
While the short-term fortunes of many real-estate funds are tied to swings in interest rates, fund managers say the underlying outlook for commercial real estate ultimately matters more. The real-estate market, they say, should remain healthy for the foreseeable future even if rates head back north.
