Why we have largely avoided REITs and utilities

Popular asset class

In today's low interest rate environment, many investors have been drawn to REITs and utilities stocks - a dual flight to perceived safety and higher yields.

Easy monetary policies have not only reduced borrowing costs, but have lowered the bar for equities, which have had very little competition from cash and bonds.  Yield seekers comparing REITs and utilities to bonds may find their valuations appealing. However, when compared to other equities, REITs and utilities rarely become cheap enough to meet our valuation threshold—and more recently look particularly expensive. Yet, despite full valuations, they have been two of the top performing groups over the past few years. Update: Schroder European REIT raises £15m from share issue ...