Everyone seems to be striving for some level of diversification within their portfolio but that typically means adding some bonds with your stock or introducing some specific equity category to go along with the significant percentage of large-cap holdings. One area that is often overlooked is real estate. Most people think of real estate as owning a home and that their home alone should make up their stake in real estate. There is far more to real estate than owning a home and just like you can invest in companies overseas you can also invest in international real estate.
Previously I took a look at the domestic real estate fund CGM Realty. This week I would like to take a look at an international offering that can work as a great diversification tool for your portfolio. While the Fidelity International Real Estate (FIREX) fund is relatively new it has some great attributes to consider.
- Manager: Steven J. Buller
- Min. Initial Investment: $2,500
- Front-Load: None
- 12(b)-1 Fee: None
- Expense Ratio: 0.91%
- Assets: $1.48 billion
- Average Market Cap: $6.5 billion
- Turnover: 234%
As I mentioned above, this fund is relatively new and has under three years of performance under its belt. Even so, in the short time it has been established it has beat its peers by sizable margins. It outperformed other real estate funds by 3.2% and 8.9% in 2005 and 2006. On top of that it has crushed the S&P 500 by double digits, and by over 27% in 2006 with an annual return of 43%.
While past performance is no indicator for future results it does say something when a brand new fund can crush its peers right out of the gate. Even though there was a recent management change with this fund it is nothing to be concerned about. Steve Buller was actually the initial manager of this fund at inception so a strong manager is still at the helm of this fund.
Steve Buller employs a research-intensive process that focuses on uncovering fundamentally sound firms with talented managers and sunny growth prospects. Buller won’t pay any price for growth though, and lately, he has avoided the sector’s priciest names.
- No front load
- Relatively low expenses
- Superior performance
- Very diversified compared to similar funds
- Limited track record
- 90-day redemption fee of 1.5%
- High turnover
The Bottom Line
If you are entertaining the idea of incorporating some real estate holdings into your portfolio this fund could fill that need nicely. It is one of the few real estate funds with an international flair so it can provide a unique element to your portfolio. International real estate doesn’t follow the same domestic trends so it can work as a great hedge.
Since this fund has a very narrow focus it should have a limited role in your portfolio, but consistently decreasing expenses and top performance will likely make this a solid holding that will stand the test of time. With sound management and a great company behind it this would be one of the first places to look for a real estate fund.
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Filed Under: Fund Reviews
About the Author: Jeremy Vohwinkle is a Chartered Retirement Planning Counselor® and spent a few years working as a financial planner. Today, he helps people make the most of their money by writing about personal finance here and elsewhere on the web. Jeremy is also Coach at Adaptu and a regular contributor for other publications such as Intuit, and American Express. Be sure to follow Jeremy on Twitter or Google+.