Wednesday, January 24, 2007

Blumberg on REITs. REITs will also figure in your strategy. What structures are you looking for?

Blumberg: We're not going to buy a $10-billion REIT. We'll be looking for specialty office REITs that are regionally focused--anywhere where we have market interest. For many years, I've been talking about REITs and takeovers. REITs are sitting ducks. They can't store cash, they can't buy back their shares. From an LBO perspective, they're just an agglomeration of assets, and the purchases you're seeing now reflect what the breakup value of those assets is vs. their value in the equity markets.

From a interview with American Ventures CEO Philip Blumberg

Sunday, January 14, 2007

TD Ameritrade gets in the target date lifecycle game.

Behold, TD Ameritrade's investment advisory group "Amerivest" has filed with the SEC for the introduction of a series of Target Date ETF's.

  • Independence 2010 ETF

  • Independence 2020 ETF

  • Independence 2030 ETF

  • Independence 2040 ETF

  • Independence In-Target ETF

These funds will track custom indexes from Zack's, designed to outperform corresponding Lipper target benchmarks.

Once each Underlying Index is established, the Index Methodology adjusts the relative weightings of each asset class within each Index, and may adjust the relative weightings of subsectors of one or more asset classes along a "glidepath", gradually moving from a more aggressive to a more conservative allocation as the target date approaches, and then gradually back to a more moderately conservative allocation following the target date.

Each ETF will invest in portfolio of domestic, international, and fixed income assets. Each fund will share the same quantitative equity portfolio, with a different weighting given to fixed income. The contents of the fixed income portfolio will be different for each fund.

This is a big step forwards for retirement investing in the US. For the first time, with just a brokerage account, people can have a complete investment program in a single ETF share. In the past, a lifecycle strategy was only available in a mutual fund or annuity. Those vehicles often had management fee's in excess of 1% and less flexibility than ETFs.

These new TDAX Independence ETFs work nicely with TD Ameritrade's, ultra low cost iZone accounts. These accounts give qualified investors ($5000 minimum) flat rate $5 trades with no monthly fees or trading minimums.

Friday, January 05, 2007

iShares FTSE NAREIT: REIT indexes you can use

The iShares trust has filed with the SEC for the creation of ETF's that will track FTSE/NAREIT indexes
  • iShares FTSE NAREIT Residential Index Fund
  • iShares FTSE NAREIT Industrial/Office Index Fund
  • iShares FTSE NAREIT Retail Index Fund
  • iShares FTSE NAREIT Mortgage REITs Index Fund
  • iShares FTSE NAREIT Real Estate 50 Index Fund

The current set of REIT ETFs (ICF), (RWR), (VNQ) all own on Real estate investment trusts that own real properties, so called equity REITs. These new ETFs chop up the REIT universe into finer sectors. To me the most interesting ETF is the iShares FTSE NAREIT Mortgage REITs Index Fund

People who own the current REIT ETFs are missing out on the lucrative world of commercial mortgage REITs such as CapitalSource (CSE), Newcastle Investment Corp (NCT) and Resource Capital Corp (RSO).

Commercial MREITs are the main sector that has not participated in REIT bubble. They are poised for growth as the interest rate environment becomes more favorable and banks dial back on commercial real estate/industrial lending. The current yields on MREITs average 8% and multiples are still attractive compared to equity REITs (pass the bubbly for (ICF) ).

Large commercial mortgage REITs like Capital Trust (CT), iStar Financial (SFI), KKR Financial (KFN) have built profitable niches taking on large loans that are too specialized and tricky for banks to handle. Other MREITs like JER Investors Trust (JRT) and Anthracite Capital (AHR) work in structured finance and mezzanine lending. The combination of a lower cost of capital, match funded leverage, and longer investment horizon gives MREITs more investment flexibility than other players. Highly recommended

(Full Disclosure: I am long JER Investors Trust (JRT) )

Monday, January 01, 2007

Wishing everyone a happy new year.

Just wanted to post a thank you to my loyal readers and wish everyone a happy new year. We are thankful all the good things that happened to us, and all the bad things that did not.

Looking forwards, Market Participant, should return to a more frequent publishing schedule sometime in late January. I'm currently in the process of starting a new business, which takes up a good bit of time, but the heavy lifting should be done by February.