It invests in a mix of REITs and real estate operating companies, as well
as in companies that are involved in real estate-related services. The
fund’s focus is on Canada, but it can also invest up to 30% in foreign
securities. At the end of May, it held 32 names, with the vast majority of
those holdings in Canada.
Goldman and his team follow a disciplined value-focused investment process,
looking for securities that are trading below what they are believed to be
worth. As a result, valuation metrics of the portfolio are well below both
the index and peer group.
With about only $35 million in assets, the fund can invest in smaller names
and can quickly reposition to invest opportunistically. Most of the fund is
allocated to mid- and small-cap companies, with only 4% currently allocated
to large-cap names.
The strategy has delivered some decent performance, with a 5-year average
annual compounded rate of return of 10.0% (to May 31), which is right in
the middle of the Real Estate Equity category. However, the shorter-term
numbers have been much better, with the fund delivering an annualized 10.3%
over 3 years, handily outpacing the competition. Year-to-date to May 31 the fund has returned a solid 3.6%.
Most impressive is the fact that with a 3-year average standard deviation
of 7.1%, the volatility of the fund has been substantially lower than its
peer group. But this has been a bit of a double-edged sword. On one hand,
the risk-adjusted numbers are excellent, and the downside protection has
been stellar. On the other hand, performance is likely to lag the group
when markets are rallying, as they did in 2014 and 2015.
Looking ahead, the fund remains focused on REITs with quality assets that
have the potential to add value through development or intensification,
that have exposure to high growth markets, and that have low payout and
leverage ratios. The portfolio’s largest exposure is to the multi-family
sector, which is often considered to be the least risky part of the market.
All things considered, this is a very solid REIT offering.
First Asset REIT Income Fund
: First Asset Investment Management
Real Estate Equity
FundGrade A+ Awards: 2013, 2016, 2017
Mid Cap Blend
Lee Goldman since June 2010
FAF5803 (Front-end load)
Dave Paterson, CFA, is the Director of Research, Investment Funds for
D.A. Paterson & Associates Inc., a consulting firm specializing in providing research and due
diligence on a variety of investment products. He is also the publisher
Dave Paterson’s Top Funds Report,
offering regular commentary and in-depth analysis of Canada’s top
investment funds. He uses a unique analytical approach to identify
funds with strong, risk-adjusted returns, and regularly publishes his
insights and analyses in Fund Library.
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only and is not intended as personalized investment advice.