Core Insights - The article emphasizes the advantages of active management in the real estate investment trust (REIT) sector, suggesting that it can outperform passive strategies over the long term [1] Group 1: ALPS Active REIT ETF - The ALPS Active REIT ETF, which will celebrate its five-year anniversary in February, is highlighted as a viable option for investors, especially given the current strong balance sheets and positive trends in funds from operations (FFO) metrics within the real estate sector [2] - The ETF offers a solid dividend yield of 3.12% and provides flexibility through active management, which can help investors identify which areas of the real estate sector are attracting professional asset allocators [3] Group 2: Sector Exposure - The ALPS ETF has a significant allocation of 19.48% to healthcare REITs, marking it as the second-largest subgroup weight within the ETF [4] - Telecommunications is noted as the most overweight sector, with investments at 135% of its index weight, while the office sector has shifted from underweight to overweight for the first time since early 2020 [5] - The ETF's largest subgroup exposure is to specialized REITs, which includes data center landlords, indicating a connection to the AI trade [6] Group 3: Shifts in Real Estate Management - Active real estate managers are increasingly shifting their focus towards lodging and retail landlords, both of which are represented in the ALPS ETF, with retail REITs making up 14% of the portfolio [7] - The lodging/resorts sector has nearly reached parity with its index weight, now at 99%, while retail and industrial sectors remain underweight at 76% and 80% of their index shares, respectively [8]

As measured by the largest ETF dedicated to the sector, real estate stocks are offering middling performances this year. That is disappointing considering the Fed has pared interest rates two times. However, that tepid sentiment arguably belies opportunity with ETFs such as the ALPS Active REIT ETF (REIT). When accounting for some fundamental factors that are vital in assessing real estate investment trusts (REITs), the ALPS ETF actually looks pretty good, as highlighted by sturdy balance sheets. That could ...

Core Insights - The real estate sector, despite being one of the smallest in the S&P 500, encompasses various subgroups, including commercial real estate (CRE) which has faced challenges due to declining office occupancy rates post-COVID [1][2] - Experts suggest a potential resurgence in CRE, which could positively impact ETFs like the ALPS Active REIT ETF (REIT) [2][4] - The ALPS ETF is actively managed, allowing for a more responsive approach to market opportunities compared to passive funds, and it offers diversification across multiple real estate subgroups [3][6] Investment Thesis - CRE's struggles may serve as a catalyst for REIT and related funds, especially if the Federal Reserve initiates a credible monetary easing strategy [4] - Real estate is viewed as an attractive investment due to its income potential, low correlation with other asset classes, and inflation-hedging properties, particularly in a macroeconomic environment characterized by uncertainty and higher interest rates [5][7] - Active management is deemed essential for capitalizing on signs of a CRE recovery, with a selective investment approach recommended [6] Portfolio Benefits - REITs provide dependable income, inflation-fighting characteristics, and reduced correlation to traditional stocks, which is significant for investors heavily invested in mega-cap growth stocks [7] - Real estate can enhance a portfolio's risk-adjusted returns by offering diverse and less correlated return streams, influenced by unique supply and demand dynamics and lease structures [8]