What is a REIT?
What are the benefits of investing in publicly traded REITs?
How does real estate diversify my portfolio?
How are real estate securities different from owning a home?
How large is the global real estate market?
How sensitive are REITs to interest rate movements?
What is Odyssey's investment approach?

What is a REIT?

Like other real estate companies, Real Estate Investment Trusts (REITs) buy, sell, develop and manage all types of commercial properties, including offices, hotels, apartments and retail spaces in countries around the world. Although REIT regulations vary from country to country, most have provisions eliminating or greatly reducing corporate tax liability in exchange for distributing a majority of income (typically 80 - 90%) to shareholders in the form of dividends.
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What are the benefits of investing in publicly traded REITs?

Created by Congress in the United States in 1960 to provide individual investors access to high quality real estate assets, publicly traded REITs offer an efficient combination of the advantages of real estate investment with the convenience of purchasing stocks in a portfolio, including:

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How does real estate diversify my portfolio?

Real estate securities have historically shown a low correlation to other asset classes.

Correlation is a statistical measure of how two investments move relative to one another. A perfect correlation of +1 indicates that both investments always move together, whereas a correlation of 0 indicates there is no relationship between the two investments.

Diversifying your portfolio across non-correlated investment types, including stocks, bonds and alternative investments like real estate can help increase returns and lower risk over the long term.

Source: Callan Associates, Inc. Data as of 9/30/07 unless otherwise noted. Correlation based on monthly returns with the exception of Housing, which is based on quarterly data. REITs - FTSE NAREIT Composite Index; Small Stocks - Russell 2000 Index; Large Stocks - S&P 500; International Stocks - MSCI EAFE Index; Housing - OFHEO House Price Index (data through 6/30/07).

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How are real estate securities different from owning a home?

Residential real estate and commercial real estate securities are two very different asset classes with different demand drivers. For example, while rising residential real estate prices had been led by accommodative long term interest rates in the past several years, commercial real estate markets rely on job growth, economic health and restrained supply.
Historically, the correlation of home prices to REIT stock performance has been quite low.

REIT Stock Correlation to Housing Prices

Source: Callan Associates, Inc. Correlation based on quarterly data as of 6/30/07. REITs - FTSE NAREIT Composite Index; Housing - OFHEO House Price Index.

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How large is the global real estate market?

As of September 30, 2007, there were over 300 real estate companies valued at over $900 billion actively traded on stock exchanges all over the world (as measured by the EPRA FTSE/NAREIT Global Real Estate Index). The United States, with its relatively mature, well-capitalized REIT market, comprises a considerable share of the global market today.

Source: FTSE EPRA/NAREIT Global Real Estate Index, 9/30/07.

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How sensitive are REITs to interest rate movements?

REITs have historically exhibited low correlations to interest rates.

REIT Stock Correlation to Long Term Bonds

While changing investor sentiment can affect performance in the short term, we believe that long term REIT performance is driven by solid fundamentals, competitive valuations relative to alternatives, and broadening demand for income and diversification.

Source: Callan Associates, Inc. Correlation data based on monthly returns through 9/30/07. REITs - FTSE NAREIT Composite Index; Interest Rates measured by the Lehman Bros. Treasury Long Term Bond Index.

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What is Odyssey's investment approach?

Odyssey endeavors to add value above benchmark returns by stock selection, sector rotation, and our skill at actively managing the portfolio. Using a fundamental, bottom-up investment approach, our research team is focused on understanding the cash flow, assets and management of each company in which we invest.

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Index Definitions

The FTSE EPRA NAREIT Global Real Estate Index is designed to track the performance of listed real estate companies and REITs worldwide. The series acts as a performance measure of the overall market.

The FTSE NAREIT Composite Index is an unmanaged index consisting of approximately 200 Real Estate Investment Trust stocks. The NAREIT Index excludes brokerage commissions or other fees.

The MSCI EAFE (Morgan Stanley Capital International, Europe, Australia and Far East) Index is an unmanaged index of over 1000 foreign common stock prices including the reinvestment of dividends. It is widely recognized as a benchmark for measuring the performance of international value funds.

The Office of Federal Housing Enterprise Oversight (OFHEO) House Price Index is a broad measure of the movement of single-family house prices.

The S&P 500 Index is a broad based unmanaged index of 500 stocks, which is widely recognized as representative of the equity market in general.

The Russell 2000 Index consists of the smallest 2,000 companies on a group of 3,000 U.S. companies in the Russell 3000 Index, as ranked by market capitalization.

Index performance is used for comparative purposes only. An investor cannot invest directly in an index.