Keepin' It Real 

Economics, Housing, & Commercial Real Estate Analysis

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  • Alex Pettee, CFA

Real Estate CEFs: Satisfying A High-Yield Fix

  • Last week, we analyzed High Yield Real Estate ETFs. This week, based on reader requests, we applied the same analysis to the Real Estate Closed-End Fund (CEFs) universe.

  • While CEFs are generally significantly more expensive and less tax-efficient than their ETF counterparts, CEFs can use leverage to amplify returns and have produced comparatively strong performance over the past decade.

  • Real Estate CEFs typically hold a broader range of securities than ETFs including preferreds, convertibles, and bonds. We examine the most popular CEFs with an average dividend yield of 7.0%.

  • Unlike High Yield REIT ETFs that typically invest in riskier or troubled companies to achieve their sky-high yields, CEFs can achieve comparable yields by levering-up a relatively higher-quality underlying portfolio.

  • While we believe ETFs are the more suitable option for the vast majority of investors, CEFs can make sense for certain investors seeking high income, access to leverage, active management, and are willing to pay a steep expense premium for it.

To continue reading, click here to visit Seeking Alpha!

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Hoya Capital Real Estate, LLC

(833) HOYA-CAP

Hoya Capital Real Estate ("Hoya Capital") is an SEC-registered investment advisory firm that provides investment management services to ETFs, individuals, and institutions, focusing on portfolio and index management of publicly traded securities in the real estate industry. It is not possible to invest directly in an index. Index performance cited in this website or commentary does not reflect the performance of any fund or other account managed or serviced by Hoya Capital Real Estate. Nothing on this site nor any published commentary by Hoya Capital is intended to be investment, tax, or legal advice or an offer to buy or sell securities. Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy and should not be considered a complete discussion of all factors and risks. Data quoted represents past performance, which is no guarantee of future results. Investing involves risk. Loss of principal is possible. Investments in companies involved in the real estate and housing industries involve unique risks, as do investments in ETFs, mutual funds, and other securities. Hoya Capital has no business relationship with any company discussed/mentioned. Hoya Capital never receives compensation from any company discussed/mentioned. Hoya Capital, its affiliate, and/or its clients and/or its employees may hold positions in securities or funds discussed on this website and our published commentary. A complete list of holdings and other important disclosures and definitions are available by clicking the links below.

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