Real Estate and Financials Go Their Separate GICS Ways

An Opportunity for Those Seeking Lower Volatility?

Having been extracted from the GICS Financials sector, Real Estate is now a GICS unto itself. A recent article on IPE.com noted that this change could lead to increased investment in REITs, as investors concerned about the volatility in public markets seek the relatively lower volatility and better risk-return tradeoff of REITs. The article added that the 10-year volatility of REITs is significantly lower than that of the overall Financials sector.

We thus set out to look at a longer-term picture of expected volatility of the new Real Estate sector, Financials including Real Estate (the “old” Financials sector), and Financials without Real Estate (the “new” Financials).