Real Estate Funds Break Out, Led by Direxion

NEW YORK ( TheStreet) -- U.S. real estate funds broke out this week, jumping 7.7% as housing starts, building permits and homebuilder confidence improved in the most recent reporting periods.

The average global or international real estate fund we track climbed 2.8% for the week ending Sept. 17. Put together, domestic and foreign funds grew 6% during the period.

Housing starts in August rose to an annual rate of 598,000 from 589,000 in July, building permits increased to 579,000 annually from July's 564,000 reading, and the National Association of Home Builders/Well Fargo index is showing homebuilder confidence for September, while still dour, rose to the highest level in 16 months.

The best-performing fund remains the Direxion Daily Real Estate Bull 3X Shares ( DRN), up an Earth-shattering 25%. It's 300% leveraged to the daily performance of the MSCI US REIT Index.

Another real estate investment trust, or REIT, that focuses on retail hints at two reasons why this sector is on the mend.

First, Kimco Realty ( KIM), up 17.7% for the five trading days under review, is selling $250 million in 10-year debt to buy locations from over-leveraged owners who are forced to sell. Second, a Kimco executive for the central U.S. region said Thursday that the ability to get tenants has "improved fairly dramatically since January" and that his company is "getting good-quality retailers" including Ross Stores ( ROST) and TJX Cos. ( TJX). Vornado Realty Trust ( VNO), up 13%, is also maneuvering to secure distressed buying opportunities.

Best-Performing Real Estate Funds for the Week
Fund (Ticker) Rating
Fund Type
1 Week Total Return
Direxion Daily Real Estate Bull 3x Shares (DRN) U
ETF
24.75%
ProShares Ultra Real Estate (URE) C
ETF
16.58%
Cohen & Steers Advantage Income Realty Fund Inc (RLF) E
Closed-End
12.82%
Cohen & Steers Premium Income Realty Fund Inc (RPF) E
Closed-End
11.85%
ProFunds Real Estate UltraSector ProFund (REPSX) E-
Open-End
11.76%
Cohen & Steers Quality Income Realty Fund Inc (RQI) E
Closed-End
11.39%
Cohen & Steers REIT and Preferred Income Fund Inc (RNP) E+
Closed-End
10.84%
Cohen & Steers REIT and Utility Income Fund Inc (RTU) D-
Closed-End
9.92%
DWS RREEF Real Estate Fund Inc (SRQ) E
Closed-End
9.87%
ING Clarion Real Estate Income Fund (IIA) E+
Closed-End
9.28%
Source: Bloomberg & TheStreet.com Ratings

On the downside are the inverse funds shorting the sector with negative leverage up to 300%, resulting in declines of 7.6% in ProFunds Short Real Estate ProFund ( SRPIX), 15% in ProShares UltraShort Real Estate ( SRS) and 22% in Direxion Daily Real Estate Bear 3x Shares ( DRV).

The only real estate funds on the worst-performing list this week are the iShares FTSE EPRA/NAREIT Developed Asia Index Fund ( IFAS), slipping 0.6%, and Claymore/AlphaShares China Real Estate ETF ( TAO), down 0.1%.

Worst-Performing Real Estate Funds for the Week Ending Sept. 17
Fund (Ticker) Rating
Fund Type
1 Week Total Return
Direxion Daily Real Estate Bear 3x Shares (DRV) U
ETF
-22.33%
ProShares UltraShort Real Estate (SRS) E-
ETF
-14.73%
ProFunds Short Real Estate ProFund (SRPIX) E-
Open-End
-7.55%
iShares FTSE EPRA/NAREIT Developed Asia Index Fund (IFAS) B-
ETF
-0.63%
Claymore/AlphaShares China Real Estate ETF (TAO) B+
ETF
-0.10%
Henderson Global Real Estate Equities Fund (HGPIX) U
Open-End
0.00%
iShares FTSE EPRA/NAREIT Developed Real Estate ex-US Index Fund (IFGL) C+
ETF
0.16%
iShares S&P Developed ex-U.S. Property Index Fund (WPS) C+
ETF
0.39%
ING Asia-Pacific Real Estate Fund (IAPAX) U
Open-End
0.68%
Forward International Real Estate Fund (KIRBX) E-
Open-End
0.71%
Source: Bloomberg & TheStreet.com Ratings

For more information, check out an explanation of our ratings.

Kevin Baker became the senior financial analyst for TSC Ratings upon the August 2006 acquisition of Weiss Ratings by TheStreet.com, covering mutual funds. He joined the Weiss Group in 1997 as a banking and brokerage analyst. In 1999, he created the Weiss Group's first ratings to gauge the level of risk in U.S. equities. Baker received a B.S. degree in management from Rensselaer Polytechnic Institute and an M.B.A. with a finance specialization from Nova Southeastern University.

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