Global Ex-U.S. Real Estate Goes On A 2017 Run

One of the best performing WisdomTree strategies in 2017 was the WisdomTree Global ex-U.S. Real Estate Index—which was up nearly 37% last year.1

Global ex-U.S. Real Estate Broadly Outperforms U.S. Real Estate in 2017

WTGRE Index Outperforms

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China as a Critical Driver: One of the most powerful factors in global markets in 2017 has been the performance of China. Within the WisdomTree Global ex-U.S. Real Estate Index, almost 30% of the nearly 37% return that we’ve seen has been driven by China, which, with an 8.2% average weight, has delivered a return greater than 180%.2

WisdomTree Already Has Trimmed Exposure to China: Many might look at that number and assume that they have missed the rally—triple-digit returns rarely repeat themselves in short order. WisdomTree’s approach has been based on following fundamentals rather than share price performance (and hence increased market capitalization). As a result of the Sept. 30, 2017, Index screening, the weight allocated to China dropped by about 8%.3 That emphasizes a natural, annual discipline to shift weight away from price performance that has extended furthest beyond the fundamentals.

Investors Have Grown Comfortable with the Outperformance of U.S. Real Estate over Global ex-U.S. Real Estate

When the argument is made for global diversification of equities, an index such as the MSCI ACWI Investable Market Index is frequently cited and people are reminded that only about 50% to 52% of the weight is in the United States—even if many U.S. investors far exceed this with their inherent “home bias.”4

Although it’s done far less often, those thinking about real estate can undergo a similar exercise, taking the FTSE EPRA/NAREIT United States Index and the FTSE EPRA/NAREIT Global ex-U.S. Index5.