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A Real Estate Fund With Less Interest-Rate Risk

Gold-rated Third Avenue Real Estate Value treads lightly in REITs and, therefore, has less interest-rate sensitivity than its peers.


Leo Acheson: Third Avenue Real Estate Value (TAREX) is not your typical real estate fund. It differs from the competition in a number of ways. While many of its competitors focus on delivering income and, therefore, invest heavily in REITs, this fund focuses more on capital appreciation and tends to tread lightly in REITs. In fact, REITs currently make up only about a third of the portfolio. As a result, the fund tends to have less interest-rate sensitivity than a lot of its peers. In 2013, when interest rates rose and some of its competitors lost money, this fund actually gained double digits.

The managers have a good amount of flexibility to invest outside of the real estate sector and can own companies closely tied to the industry, such as homebuilders. The managers also can buy companies at different points in the capital structure and, at times, have owned the debt securities of companies when they viewed it as attractive.

We rate the fund Gold because we have high conviction in the process and the team. Mike Winer has led the strategy since its 1998 inception, and comanagers Jason Wolf and Ryan Dobratz also have a long history on the fund.

Third Avenue, as a firm, has recently faced succession issues; however, this team has been largely unaffected. Overall, for investors seeking an opportunistic real estate strategy, we think this Gold-rated fund is a good option.

Leo Acheson does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.