Real Estate REIT

REIT mutual fund: CSRSX by Jon Cheigh

Portfolio manager Jon Cheigh takes some pride in the detective work Cohen & Steers Realty Shares (CSRSX) does researching the REITs it invests in. On a recent trip to Los Angeles, Cheigh posed as an apartment hunter so he could get a look at a building near the airport. Other times, the fund's four analysts and two research associates take time out from client visits to stroll through nearby shopping malls to check out upkeep and traffic. They'll track down tenants' store managers in parking lots to get some personal insights, or even check out the cleanliness of public bathrooms.
Such attention to detail is needed, Cheigh says, to get an edge when trying to choose among the 110 or so companies that make up the publicly traded domestic REIT universe. "Real estate is a local business and you've got to hit the road to get in on what's going on," he says.
Cheigh's gumshoe approach seems to help. As of Dec. 29, Cohen & Steers' fund has posted a 10-year average annual total return of 11.4%, putting it in the top 14% of its mutual-fund category, according to Morningstar. Over the same period, the fund bested the S&P 500 by nearly nine percentage points a year and its peer group by more than two.

Cohen & Steers thinks the rally has legs, even if slow growth in 2012 limits gains. Following three bear markets in real estate (1973-74, 1990 and 1998) REIT rallies have lasted between seven and 12 years, producing an average annual return of about 22%. The firm sees no reason it shouldn't happen again. Many REITs have raised capital and firmed up their balance sheets. And there's virtually no new supply to weigh down property values and lease prices.