Dimensional Real Estate
Dimensional’s real estate strategies are based on original research by Professors Donald B. Keim and Joseph Gyourko at the Wharton School. The Keim and Gyourko research analyzed the risk/return characteristics of different types of real estate related firms traded on the New York and American stock exchanges.
This research indicates that returns from a US real estate strategy are related to the actual performance of the US real estate market. Keim’s additional fifteen-year study of global securitized real estate confirms these securities behave differently enough from equity securities to be considered a separate asset class.
The growth of securitized real estate has created an investment universe with sufficient size and liquidity to make both US and international real estate strategies feasible. The most common form of securitized real estate are real estate investment trusts or REITs that pool investors’ funds for investment primarily in income-producing real estate, or in loans or interests related to real estate. The correlations among these real estate securities have been found to be low across countries, across regions, and within each issuing country’s own equity markets, suggesting there are additional diversification benefits that can be obtained from adding the asset class to globally diversified portfolios.
The Real Estate Securities Portfolio is market-cap weighted and broadly diversified across different US property types. Investments are made in all eligible, publicly traded REITs. The stocks in the portfolio represent over $100 billion in market capitalization and pro-rata ownership of several thousand properties.
The management of this portfolio is similar to our other portfolios. From a design perspective, we target a broad set of securities in the asset class and strive to be fully invested. During implementation, we are cognizant of the costs to the investors. These include costs that are difficult to quantify, such as market impact, as well as the factors going into the final expense ratio, such as transaction and management fees. We do not bear the high costs that many active managers incur, such as those caused by high turnover or cash drag, nor are we forced to execute trades around index reconstitutions.
On a regular basis, we review all eligible companies to ensure that their principal line of business is real estate related. We do not purchase prison REITs. Our screening process also excludes REITs that are in extreme financial difficulty, are involved in a merger or consolidation, or are the subject of an acquisition that could result in a company no longer being principally in the real estate business.
Dimensional’s International Real Estate Securities Portfolio offers exposure to real estate securities in non-US countries and provides a complement to Dimensional’s existing US real estate securities fund as well as the opportunity for additional investment diversification.
The Portfolio generally uses a market-cap weighted approach and invests in non-US REITs and companies Dimensional considers to be REIT-like entities. Securities eligible for purchase will generally not be purchased in Dimensional’s existing non-US equity strategies.
The Global Real Estate Securities Portfolio seeks to capture global real estate returns through a fund-of-funds approach, owning shares of the Real Estate Securities Portfolio and the International Real Estate Securities Portfolio. This streamlined approach is intended to address the needs of investors who would otherwise purchase two separate real estate portfolios and determine the appropriate allocation to each.
Through its underlying funds, the Global Real Estate Securities Portfolio will generally purchase REITs and companies considered to be REIT-like entities in US, non-US developed, and emerging markets countries.
The principal risks of investing in these portfolios may include any of the following: fund of funds risk, market risk, foreign securities and currencies risk, small company risk, risk of concentrating in the real estate industry, real estate investment risk, foreign securities and currencies risk, small company risk, and emerging markets risk. These risks are fully described in the prospectus in the section entitled “Principal Risks.”
Dimensional Fund Advisors is an investment advisor registered with the Securities and Exchange Commission. Consider the investment objectives, risks, and charges and expenses of the Dimensional funds carefully before investing. For this and other information about the Dimensional funds, please read the prospectus carefully before investing. Prospectuses are available by calling Dimensional Fund Advisors collect at (512) 306-7400 or at this link.
Investing involves risks such as fluctuating value and possible loss of principal investment.
Mutual funds distributed by DFA Securities LLC