Lawrence Carrel
The Cohen & Speers fund is filled with mostly international stocks. But the S.A. Real Estate Securities fund holds many domestic companies such as Simon Property Group (SPG Quote - Cramer on SPG - Stock Picks), Vornado Realty Trust (VNO Quote - Cramer on VNO - Stock Picks) and Boston Properties (BDX Quote - Cramer on BDX - Stock Picks).
The best performer of the group was (AGRNX Quote - Cramer on AGRNX - Stock Picks)Aston/ABN AMRO Global Real Estate (AGRNX), which is up 1.2% since it launched in August. Part of the problem is that investors tend to chase returns, so a company that doesn't have an offering in the hottest sector is likely to lose assets to a competitor. They have an incentive to launch offerings at the wrong time just to hold on to the assets they already have. "The fund companies are afraid of missing the boat, and you can't expect them to be charitable organizations. But the way things work is a little shifty," says Clifton Green, an associate professor of finance at Goizueta Business School at Emory University. Trzcinka notes that it is all the more tempting for fund companies to launch new offerings at the top of the market, because investors are generally willing to pay higher management fees for access to a hot sector. "I would predict that these funds have higher fees than the average fund," says he says. "Investor rushing into hot funds tend to be less fee-sensitive, because they believe the funds will always go up, so you can charge more. In a 2002 study, Trzcinka calculated that the average retail investor who bought into the tech bubble at the wrong time lost an annualized 31.6% from 1998 to 2001. The study also concludes that technology funds destroyed $30.5 billion of shareholder wealth. In short, investors need to take responsibility for their money and stop chasing returns. For those who got into REIT funds too late, there is a silver lining: If you sell them today, you can write off your losses against this year's taxes. Coming up next: MVC Capital is Worth Another Look
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