| Fund Company | Sentry Investments |
| Fund Type | Real Estate Equity |
| Rating | $$$$ |
| Style | Value |
| Risk Level | Medium |
| Load Status | Optional |
| RRSP/RRIF Suitability | Excellent |
| TFSA Suitability | Excellent |
| Manager | Dennis Mitchell since December 2007 |
| MER | 2.73% |
| Code | NCE 705 – Front End Units NCE 305 – DSC Units |
| Minimum Investment | $500 |
Analysis: The Sentry REIT Fund is one of a few options that mutual fund investors have when looking for exposure to REITs. There are a number of funds that are focused on real estate, but most of those invest more in operating companies as opposed to REITs. For example, as of May 31, the Sentry REIT Fund held 78% in REITs while the CIBC Canadian Real Estate Fund held only 39% of its assets in REITs.
It is a concentrated portfolio that usually holds between 40 and 50 names. It can invest in REITs of all sizes and as of March 31 held nearly two-thirds of the fund in mid caps, 16% in large caps and 14% in small caps. It pays investors a monthly distribution of $0.0833 per unit, which equals an annualized yield of 7.8% at current prices.
Performance since the February 2009 has been very strong, more than doubling. As impressive as that was, 2008 was a year that investors in the fund would like to forget, after losing 43%. Even with that big drop, the overall level of volatility of the fund has remained in check and is lower than both the real estate category and the Dow Jones Global Real Estate Index.
Recent performance has been strong and the outlook for REITs remains positive. According to a report issued by CIBC World Markets, the demand for REITs is expected to be driven by strong property fundamentals, low cost debt, cap rate compression, increased foreign investment and increased takeover activity in the sector. These factors should bode well for this fund in the coming months.
Sentry is really the only way for investors to gain significant exposure to REITs in a mutual fund. There are two newer fund options available, First Asset REIT Income Fund and Middlefield ActiveIndex REIT Fund. While early performance indicators look positive, they both have track records of less than two years, so there is not enough data on which to base a more detailed analysis.
Sentry REIT is not cheap. It carries an MER of 2.73%. If you are looking for lower cost REIT exposure, there are two ETFs available; the iShares S&P/TSX Capped REIT Index and the BMO Equal Weight REIT Index, both of which have outpaced the Sentry fund during their existence. The iShares ETF has an MER of 0.60% while the BMO is 0.62%, dramatically lower than the Sentry Fund.