Through the end of the second quarter of 2014, the Real Estate Investment Trust sector of the markets has been one of the top-performing asset classes. As reported by one index of REIT securities, the total return for the second quarter totaled just over 7 percent.
At the same time, an aggregate index of fixed-income bonds reported a total return for the second quarter of approximately 2 percent.
Holding cash in an investment portfolio continued to be a relatively expensive alternative. With yields on most cash equivalent securities and investment vehicles at something close to zero percent, outsized cash positions in a diversified investment portfolio continued to underperform most asset classes in the second quarter and year to date as well.
On a year-to-date basis through the end of June, Master Limited Partnerships have generally performed relatively well. One index that tracks a broad group of MLP’s indicated a year-to-date total return of over 16 percent.
Both the MLP asset class and the REIT asset class are likely benefiting from the continued search by many income-oriented investors for yield. In a continued environment of historically low interest rates, these sectors should continue to attract investors desirous of a stream of income. When interest rates move higher, most interest sensitive asset classes should be expected to be exposed to potential price deterioration.
Within the U.S. equity markets, companies classified in the mid-cap value oriented space recorded a second quarter total return of over 5.5 percent. On a year-to-date basis, this same grouping of companies is reported to have aggregate total returns of over 11 percent, as indicated by an index that tracks this group of companies.
A lower returning sector of the U.S. equity market for the second quarter, as measured by an aggregate equity index, was the small-cap growth space. With a reported total return of under 2 percent for the most recent quarter, small-cap growth stocks continued their year-to-date relative underperformance to most of the other U.S. stock sectors.
Of course, past performance is no guarantee of future returns in any asset class or sector of the investment markets. Reviewing historic asset returns can help identify the range of factors that may have influenced these returns and can help in the decision processes for future investing.
Kirby Brown is the CEO of Beneficial Financial Group, which is based in Salt Lake City.