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Some Mutual Funds Boost REIT Weightings Ahead Of GICS Change

While only three of the 20 largest actively managed large-cap core mutual fund portfolios with REIT exposure are overweighted to REITs relative to the SPDR S&P 500 ETF (SPY), the weightings for several others have increased by double-digit percentages in recent months.

Following S&P Dow Jones Indices' annual rebalancing after market close Sept. 16, REITs will become the 11th sector in the S&P 500 index. Investors will have a better understanding of which funds have high and low REIT exposure, relative to the current 3.17% weighting in the SPDR S&P 500 ETF that tracks the commonly used benchmark.

Mutual fund exposure to REITs

Among the 20 largest core funds with REIT exposure, Fidelity Strategic Dividend & Income Fund (FSDIX) had the highest exposure to REITs as of a July 25 review of Lipper's large-cap core mutual fund universe. The $4.81 billion portfolio has a 15.1% weighting in REITs. Simon Property Group Inc. is among the fund's top-10 holdings, while Boston Properties Inc., Ventas Inc. and Extra Space Storage Inc. are some of FSDIX's other sizable positions.

The $5.64 billion T Rowe Price Dividend Growth (PRDGX) fund had the second-highest weighting in REITs, at 4.09%. Extra Space and American Tower Corp. were the two largest REIT positions.

REIT exposure of several other sizable large-cap core funds has moved closer to the S&P 500 index’s weighting since last reviewed.
Columbia Disciplined Core Fund (AQEAX), with a 3.19% weighting, was the third portfolio to have overweighted exposure to REITs. Digital Realty Trust Inc. and Public Storage were the largest holdings for this $3.95 billion portfolio.

Meanwhile, the REIT exposure of several other sizable large-cap core funds has moved closer to the S&P 500 index's weighting since last reviewed.

The REIT weighting for the $9.61 billion Fidelity Series All-Sector Equity Fund (FSAEX) increased 22.9% to 2.90% of assets as of May 31, from 2.36% of assets on April 30. This Fidelity portfolio holds meaningful positions in Duke Realty Corp., Extra Space, American Tower, Boston Properties and Equity LifeStyle Properties Inc.

While Fidelity Series Growth & Income Fund (FTBTX) is still underweighted in REITs, its 0.45% exposure at the end of May is 32.4% higher than its 0.34% exposure March 31. In addition to American Tower and Crown Castle International Corp., the fund holds shares in Sabra Health Care REIT Inc. and First Potomac Realty Trust.

Positions in American Tower, STORE Capital Corp. and Tanger Factory Outlet Centers Inc., partially offset by a short sale of Crown Castle, comprised the 2.41% REIT weighting for MFS Research Fund (MFRFX) as of May 31. This $4.93 billion portfolio's exposure to REITs increased 14.2% from 2.11% on March 31.

Fidelity Series All-Sector Equity Fund