Talking REITs With Tuckerman's Amos Rogers

The relationship between interest rates and REITs is simple. One goes up, the other goes down. Right?

Not so, says Amos Rogers, managing director of the $136 million (SSREX Quote)SSgA Tuckerman Active REIT fund. He contends that the link isn't as ironclad as investors seem to think. Rogers says the recent correlation is a short-term phenomenon tied to investors chasing yield rather than watching improving REIT fundamentals.

So why should investors trust Rogers and not the conventional wisdom? One reason might be the success of his fund. Over the past five years, Rogers' fund has been up 18.7% annually, 21 percentage points better than the S&P 500.

TheStreet.com checked in with Rogers to see if there are any other reasons why investors should take his word when it comes to REITs -- and rates.

When interest rates dropped last month, REITs regained a lot of what they lost in January. What's the true relationship between interest rates and REITs?

Over the long term, there is not a very high correlation between the two. You need to desegregate short term and long term, because we are going through a period right now where the market has a different characteristic. We've had five years of good performance, so investors are wary of a downturn. And we have a lot of nondedicated investors who came into the market looking for yield, and as a result, the REIT market has become hypersensitive to all macroeconomic news, including interest rates.

Also, with regard to interest rates and real estate, there is a more fundamental link which goes back to why interest rates increase. Interest rates increase because the economy is improving and there is a focus on managing inflation. Improving economic and inflationary periods have both traditionally been good periods for real estate, because it benefits from rising prices and rising rental rates. And real estate has traditionally been a good hedge against inflation. So when you get beyond the short-term rate movement and look at what's causing rates to rise, that's typically a good sign for the real estate market.