VNQ Vs. VNQI: Why International Real Estate Looks More Appealing Right Now

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U.S. REITs have outperformed global peers significantly, driven by valuation multiple expansion, stronger dollar, and higher real GDP growth.U.S. REITs benefited from stronger real GDP growth, ...

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VNQI: Why International Real Estate Looks More Appealing Right Now","media":"seekingalpha","content":"<div>\n<p>U.S. REITs have outperformed global peers significantly, driven by valuation multiple expansion, stronger dollar, and higher real GDP growth.U.S. REITs benefited from stronger real GDP growth, ...</p>\n\n<a href=\"https://seekingalpha.com/article/4738888-vnq-vs-vnqi-why-international-real-estate-looks-more-appealing-right-now\">Source Link</a>\n\n</div>\n","source":"seekingalpha","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>VNQ Vs. VNQI: Why International Real Estate Looks More Appealing Right Now</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nVNQ Vs. VNQI: Why International Real Estate Looks More Appealing Right Now\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-11-20 15:54 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4738888-vnq-vs-vnqi-why-international-real-estate-looks-more-appealing-right-now><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>U.S. REITs have outperformed global peers significantly, driven by valuation multiple expansion, stronger dollar, and higher real GDP growth.U.S. REITs benefited from stronger real GDP growth, ...</p>\n\n<a href=\"https://seekingalpha.com/article/4738888-vnq-vs-vnqi-why-international-real-estate-looks-more-appealing-right-now\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"BK4588","symbol_name":"碎股","start_time":0,"source_url":"https://seekingalpha.com/article/4738888-vnq-vs-vnqi-why-international-real-estate-looks-more-appealing-right-now","article_id":"2484016872","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/473617476/image_473617476.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2484016872","pubTimestamp":1732089262,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"U.S. REITs have outperformed global peers significantly, driven by valuation multiple expansion, stronger dollar, and higher real GDP growth.U.S. REITs benefited from stronger real GDP growth, supported by population increases and productivity gains, while international REITs faced challenges like weaker growth and demographic issues in certain regions.VNQI trades at significantly lower valuation multiples than VNQ, despite a comparable return on equity, suggesting potential undervaluation of international real estate.While VNQI carries higher risk due to exposure to smaller REITs and less stable markets, its attractive valuation may offer better long-term returns for investors willing to take additional risk.   Pixsooz The World is Your Oyster – William Shakespeare To say that U.S. Real Estate has outperformed the rest of the world would be a significant understatement. Using the popular Vanguard Real Estate ETF  and the Vanguard Global ex-US Real Estate ETF  as proxies, it can be see","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"BK4588":"碎股","VNQ":"不动产信托指数ETF-Vanguard","VNQI":"Vanguard Global ex-U.S. Real Estate ETF","BK4585":"ETF&股票定投概念"},"translate_title":"VNQ与VNQI：为什么国际房地产现在看起来更有吸引力","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"VNQ":0.9,"VNQI":0.9},"content_text":"U.S. REITs have outperformed global peers significantly, driven by valuation multiple expansion, stronger dollar, and higher real GDP growth.U.S. REITs benefited from stronger real GDP growth, supported by population increases and productivity gains, while international REITs faced challenges like weaker growth and demographic issues in certain regions.VNQI trades at significantly lower valuation multiples than VNQ, despite a comparable return on equity, suggesting potential undervaluation of international real estate.While VNQI carries higher risk due to exposure to smaller REITs and less stable markets, its attractive valuation may offer better long-term returns for investors willing to take additional risk.   Pixsooz The World is Your Oyster – William Shakespeare To say that U.S. Real Estate has outperformed the rest of the world would be a significant understatement. Using the popular Vanguard Real Estate ETF (NYSEARCA:VNQ) and the Vanguard Global ex-US Real Estate ETF (NASDAQ:VNQI) as proxies, it can be seen that U.S. REITs have delivered returns almost five times higher since VNQI was launched a little over a decade ago. What explains this massive divergence, and does it mean that global real estate is now more attractive? This is what we'll investigate in this article. Data by YChartsDollar Strength One factor affecting the relative performance of both ETFs is dollar strength, which exhibits significant cyclicality. Using the Invesco DB US Dollar Bullish ETF (UUP) as a proxy, we can see that it is only about 2% below the all-time high. The Fed has arguably been, on average, more hawkish with monetary policy in recent years to control inflation compared to other central banks. This has been a strong tailwind for the dollar, but not one that is guaranteed to continue. Still, this only explains a very small part of the underperformance of global real estate, so we'll have to continue investigating. Data by YChartsFundamentals Another factor that has played in U.S. REITs' favor is an economy that has been growing at a faster rate in real terms. Real economic growth is fundamentally a combination of population growth and higher productivity. Population growth results in more people needing places to shop, live, and work. For its part, higher productivity makes companies more profitable and able to afford rent increases. This explains part of the outperformance, but not all of it. It is possible that valuation expansion plays an even bigger role, which we will analyze in a moment. Data by YChartsTop Holdings Looking at the top five holdings for each ETF, it actually seems that the average quality is not that different, judging by the Return on Invested Capital (ROIC) average for the last five years. For VNQ the average 5-year ROIC for its top five positions is 4.37%.   Average:   4.37%   Company % Portfolio Weight ROIC (5Y Average)   Prologis (PLD) 5.96% 5.20%   American Tower (AMT) 5.69% 6.27%   Equinix (EQIX) 4.78% 3.57%   Welltower (WELL) 4.50% 3.34%   Digital Realty (DLR) 3.30% 3.48%   Click to enlarge VNQI has a slightly higher 5-year average ROIC for its top positions, with a 5.59% average. An important difference is that VNQ is significantly more concentrated in its top positions, with 49.6% allocated to its top ten investments, while VNQI only has 21.9% in its top ten positions. Smaller REITs often have a higher cost of capital, and that could be playing a role here, with the median market cap for a VNQ company at $33.3 billion and only $5.2 billion for VNQI.   Average:   5.59%   Company % Portfolio Weight ROIC (5Y Average)   Goodman Group (OTC:GMGSF) 4.35% 11.74%   Vonovia (OTCPK:VNNVF) 2.81% 2.16%   Mitsui Fudosan (OTCPK:MTSFF) 2.5% 3.25%   Mitsubishi Estate (OTCPK:MITEF) 1.96% 3.55%   Daiwa House Industry (OTCPK:DWAHY) 1.95% 7.26%   Click to enlarge Valuation Still, it appears that the bulk of the outperformance results from valuation multiple expansion for U.S. REITs. At the moment, most valuation metrics are about 3x higher for VNQ compared to VNQI. The portfolio for VNQ currently has an average return of equity of around 7%, compared to 6.7% for VNQI, which is a very small difference to justify nearly a 3x premium in valuation metrics like Price-to-Book and Price-to-Earnings.   VanguardRisks We do believe that VNQI comes with greater risks, with some of the regions in which it is invested not having as strong governance and oversight as that available in the U.S. There are other issues, such as markets like Japan having demographic issues and extremely low economic growth. In terms of geographic exposure, VNQI has roughly 21.3% of its assets in Japan, 11.8% in Australia, 7.8% in the UK, 7.3% in Hong Kong, and 5.9% in China. China in particular has been having serious real estate issues after excessive building. Takeaway The Real Estate sector in the U.S. has vastly outperformed global peers, as seen by the total return performance delivered by VNQ and VNQI. While the strength of the U.S. dollar and the higher real GDP economic growth contributed to this outperformance, the bulk of it appears to be valuation multiples expansion. We believe this is a great time to look at international REITs, though we are not convinced VNQI is the best option to do so. It is exposed to many small REITs that likely suffer from a much higher cost of capital. Still, if we had to invest in one of these two ETFs at the moment, we would go with VNQI because of its significantly less demanding valuation.  Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"analysis","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.3","shortVersion":"4.29.3","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2484016872"}