Property Strategist Discusses Urdang, REIT Hedge Funds

Jan 26 2006 | 7:41pm ET

Plymouth Meeting, Pa.-based Urdang Capital Management is readying to launch its first hedge fund, a long/short vehicle that invests in real estate investment trusts, according to a source close to the firm. Managers at the firm did not return calls seeking details, but one industry expert did give us his thoughts on whether he thinks it is a good time to be launching a REIT hedge fund.

Michael Hudgins, a research strategist at Boston-based Property & Portfolio Research, said that Bank of New York's acquisition of Urdang should prove beneficial for the real estate investment firm, but that he is surprised to hear that it is launching a REIT hedge fund at this time.

“I find it interesting that Urdang would do that. It seems to me that a hedge fund would be looking at something else,” said Hudgins, “but real estate is still one of the best plays out there, and maybe there is a last hurrah for specific REIT sectors in 2006, like retail.”

“Real estate has priced itself into a true “y + g = r” environment (yield + growth = total return). The private side is sitting in a low yield basin from which only cash flow growth will save investors from capital losses as yields begin to rise in 2006 for some sectors and 2007 for others,” he said.

Hudgins believes that picking the right sectors and metropolitan areas to invest in is critical in this environment. “Dividend yield spreads are close to zero for the NAREIT Index, and they were negative for warehouse and retail as of December. The last time we had negative spreads we ended up with a 33% correction in the price index,” said Hudgins. “It’s a simplified view, but one to consider.”

Hudgins does not discount the idea of starting a real estate hedge fund at this time. He points out that there is nothing else out there that is particularly attractive.

“Stocks are showing some intermittent perkiness but are not confidence-inspiring, and bonds prices can only really go down as yields start to rise from their current position in the ‘low-yield basin.’ Like the private side, there will be sectors and stocks that provide enough growth to fend off capital losses over 2006 and/or the next three years, but the bottom line is that it may be a great time to start shorting REIT stocks,” said Hudgins. “Maybe that’s part of Urdang’s strategy.”


In Depth

Q&A: Brevan Howard’s Charlotte Valeur Talks Strategy

Sep 18 2014 | 11:18am ET

Charlotte Valeur chairs the board of Brevan Howard Credit Catalysts, an LSE listed...

Lifestyle

Hedgies Rock Out For Children's Charity

Sep 15 2014 | 8:40am ET

It's that time of year again—when hedgies trade in their spreadsheets for guitars...

Guest Contributor

Volkered: How Financial Sector Reforms are Creating Opportunities for Hedge Funds

Sep 16 2014 | 11:28am ET

New regulations have dramatically curtailed proprietary trading activity in investment...

 

Editor's Note

    Get A Sneak Peak Of The Alpha Pages

    Aug 25 2014 | 11:21am ET

    As many of you know, FINalternatives was recently acquired by the owners of Futures magazine, a firm called The Alpha Pages LLC. Today marks the soft-launch of a new sister site for both publications. As its name suggests, The Alpha Pages will cover all types of alternative investments, going far beyond the more well-known ones such as hedge funds and private equity. Read more…

 

Futures Magazine

September 2014 Cover

The London Whale: Rogue risk management

Credit default swaps brought down the London Whale and cost JPMorgan $6.2 billion. Here is how it happened.

The Alpha Pages

TAP July/August 2014 Cover

The Alpha Pages Interview: Senator Rand Paul

Senator Paul sat down in the debut series of the Alpha Pages Interview to discuss the broken tax code, regulation surrounding Bitcoin, and his plans for the 2016 Presidential election.