September 30, 2021


It’s been a good long while since the US experienced high inflation. We haven’t even seen inflation top 5% in the last 30 years. We don’t know where inflation is heading next, but whether this recent inflationary trend is transitory or not, it’s in the news, and on people’s minds.

Real Estate Investment Trusts (REITs) own and lease property for the most part. During inflationary times like the current one, when more dollars are chasing less supply, property owners are generally sitting pretty. The economy is growing so they have low vacancies. The valuations of their properties are high. And with prices going up all around, landlords are probably comfortable raising rents. This is all quite painfully obvious to anyone looking to buy or rent a place to live right now.

Stock returns for REITs have been good so far this year, up over 15%. Does that mean REITs are good to hold when inflation is high? Do they help an investor protect the value of their money against erosion? Let’s look at what history says.

Our last real spell of high inflation was the 1970s. The whole decade was tough, and didn’t abate until 1982. The worst 8-year period in history for the Consumer Price Index was 1974-1981, with the worst 3 years 1978-1980, and the worst single year 1979. Over each time period, US REITs outpaced inflation, and the broader equity market as well.

Inflation, REITs, and Equities in the 1970s

Consumer Price Index13.5%11.6%9.3%
FTSE NAREIT Equity REITs Index24.4%23.1%16.3%
S&P 500 Index18.4%18.7%7.9%
Investors sometimes assume commodities, gold, and Treasury Inflation-Protected Securities (TIPS) are best for protecting against inflation. The historical record doesn’t quite confirm that. One study compared returns of five asset classes against CPI for rolling six-month periods between 1978 and 2011.1 During periods of high inflation, commodities did win most often, but stocks and REITs were both more effective than TIPs and gold. And when inflation was severe, REITs were the most effective overall.

Inflation Protection Success Rates

High Inflation (>3.2%)68.9%70.4%60.8%53.8%43.2%
Severe Inflation (>8.6%)65.0%55.0%55.0%27.5%60.0%

Investors might be comforted that REITs have been good at inflation protection in the past.  While history may not repeat itself, holding REITs as inflation hedge seems prudent.

Represents the percentage of the 399 overlapping six-month periods from monthly data between Jan. 1978 and Aug. 2011 that this selection of five asset classes outperformed the Consumer Price Index:

(1) REITs as measured by the FTSE NAREIT All Equity REITs Index
(2) Commodities as measured by the S&P Goldman Sachs Commodity Index (GSCI)
(3) Stocks, as measured by the S&P 500 Index
(4) TIPS as measured by the Ibbotson Associates synthetic U.S. TIPS series
(5) Gold as measured by the S&P GSCI Gold Index.

All indexes measure total returns (i.e. income plus price appreciation).

1 Case, Bradford and Wachter, Susan M., Inflation and Real Estate Investments (November 29, 2011). U of Penn, Inst for Law & Econ Research Paper No. 11-33, Available at SSRN: or

Please refer to the Prospectus for full risk disclosures. All data as of September 30, 2021 and subject to change daily.

One cannot invest directly in an index. Index performance is not indicative of the fund’s performance.

The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services

The FTSE Nareit All Equity REITs Index is a free-float adjusted, market capitalization-weighted index of U.S. equity Real Estate Investment Trusts.

The S&P Goldman Sachs Commodity Index (GSCI) is a composite index of commodity sector returns representing an unleveraged, long-only investment in commodity futures that is broadly diversified across the spectrum of commodities.

The S&P 500 Index, or Standard & Poor’s 500 Index, is a market-capitalization-weighted index of 500 leading publicly traded companies in the U.S.

TIPS are US government- issued bonds that are linked to inflation. The principal of the bond is linked to the Consumer Price Index and the coupon rate is fixed, resulting in both principal and coupons that will move directly with inflation.

The S&P Goldman Sachs Commodity Index (GSCI) Gold Index, a sub-index of the S&P GSCI, provides investors with a reliable and publicly available benchmark tracking the commodity exchange (COMEX) gold future.

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