ALPS Active REIT ETF Tops Peers, Could See Further Gains

The ALPS Active REIT ETF (REIT) has risen about 13% year-to-date, outperforming the largest passive REIT ETF by roughly 500 basis points since January. Analysts and managers point to active stock selection, modest hotel exposure, improving funds from operations forecasts and steady U.S. economic growth as contributors to the run-up.

The fund marked its fifth anniversary in February and carries a trailing 12-month dividend yield of about 2.74%. Managers can shift allocations, and that flexibility is noted as a differentiator versus passive funds. The ETF’s small stake in hotel REITs is notable against recent revenue-per-available-room trends, and the World Cup starting this week is expected to increase demand and rates in several host cities.

Jefferies analyst David Katz noted that many landlords are pruning portfolios, reinvesting in higher-quality assets and exercising acquisition discipline as transaction activity remains disrupted and the cost of capital stays elevated. He observed that owning fewer, higher-quality assets may deliver stronger returns than pursuing growth for its own sake and that public REIT valuations are being compared with private-market levels.

Truist analyst Michael Lewis wrote that FFO per share for REITs covered by his team is projected to accelerate into 2027. He cited healthy GDP growth, likely increases in business capital spending and indicators that hiring may pick up from current levels as drivers of demand for quality properties.

Many public REITs trade at discounts to net asset value and at lower-than-typical FFO multiples versus historical norms. Market participants say a decline in short-term interest rates, widely expected at some point over the next year, would lower financing costs for property owners and could narrow those valuation gaps.

For the ALPS fund specifically, managers’ active allocation shifts toward higher-quality holdings are seen as a factor in its outperformance versus passive peers during recent market dislocation. Analysts point to the recovering lodging market, improving FFO outlooks and steady U.S. economic indicators when explaining investor interest in active REIT strategies.

REIT performance is tied to economic growth, job trends and interest-rate moves because those factors affect occupancy, rents and borrowing costs. After pandemic-era disruptions, many REITs focused on trimming portfolios and maintaining capital discipline, and funds from operations remain a core metric for assessing dividend sustainability and operational health in the sector.