REIT Index Distortion: How To Capitalize

About: Vanguard Real Estate ETF (VNQ)
by: Dane Bowler
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Dane Bowler
Value, hedge fund analyst, REITs, long/short equity

REIT prices are falling rapidly and much of the decline is hidden by market cap weighted indices.

There is now a valuation rift between small and large REITs.

We see value in buying small REITs with low P/FFO multiples.

REIT indices are no longer representative of REITs. This article will detail the disparity and discuss how to take advantage of it with a pair trade shorting the Vanguard REIT Index (VNQ).