Colony Capital has developed a differentiated smart beta index, designed to outperform the REIT market with the goal of risk mitigation and loss avoidance.  The Colony Capital Fundamental US Real Estate Index is a liquid and efficient way to invest in real estate, using a formulaic approach based on time-tested real estate investing principles.

The Index uses proprietary criteria to select a portfolio of US real estate investment trusts (REITs) designed to outperform market benchmarks by eliminating the riskiest REITs on the basis of leverage, valuation, margin and yield. The Index is owned, licensed, administered and marketed by Barclays Bank PLC.

Colony Capital Fundamental US Real Estate Index

Colony Capital Fundamental US Real Estate Index draws on Colony Capital’s expertise in global real estate investing experience coupled with Barclays’ market leading strengths in the structuring, trading and distribution of indices. The Index aims to invest in a dynamic and diversified portfolio of US listed Real Estate Investment Trusts (“REITs”), selected using liquidity, market cap and fundamental investment criteria.

Colony Capital Fundamental US Real Estate Index Total Return

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Ticker

Differentiated Fundamental Approach

The Index aims to outperform REIT market benchmarks by avoiding REITs with high leverage, expensive valuations, low margins and high yields.

Profit Margin

Emphasis on quality over value

Higher margins can signal higher quality and provide a margin of safety in periods of stress

Leverage Ratio

Conservative financing is preferred

Higher leverage can increase risk without increasing returns

Valuation Multiple

REITs have valuation limits

High valuation multiples can lead to underperformance

Dividend Yield

High dividends may signal high risk

As in credit, higher yields often signal lower quality assets

Quality Over Value
  • The benefits of inflation and economic growth accrue to owners of quality real estate in the form of growing rents.
  • Investors who sacrifice quality risk owning obsolete buildings that cannot be filled at any price.
  • Index screens for quality through rules that exclude some of the riskiest REITs.
Conservative Financing
  • Unlike privately-held real estate, REITs are permanent life vehicles with internal financing, with no external capital partners.
  • A conservative balanance sheet is the best defense against a downturn; even enabling a REIT to 'play offense' during times of market distress.
  • Mere market perception of balance sheet risk can impair how a REIT trades.
  • Index screens for balance sheet risk by excluding the most levered REITs.
REITs Have Valuation Limits
  • REITs with quality real estate, conservative balance sheets, scale and strong governance are most optimized for accretive external growth.
  • Index screens for valuation by excluding the most expensive REITs.
High Dividends May Signal High Risk
  • In REITs, just as in credit, higher yields generally signal higher risk, not attractive value.
  • Yield as a risk factor is furthered in REITs by the "yield chasing" behavior of the market - as higher yielding REITs attract some of this "yield chasing" capital, it makes them incrementally overvalued. Thus, high yield in REITs signals both higher risk and overvaluation at the same time.

Index Allocation

As of the last rebalance date in August 2019, the Index selected 63 REITs with $749 billion market cap out of the sub-universe of 130 REITs with $1.19 trillion market cap.

Index Allocation Chart

Partnership with Barclays

Colony Capital and Barclays have partnered to create the Colony Capital Fundamental US Real Estate Index. Barclays Bank PLC owns the index and licensing rights related to the Index. Barclays Index Administration, a distinct function within the investment bank of Barclays Bank PLC, performs the role of index sponsor and administers the Index.

For inquiries about the Index,
visit Barclays directly at:

https://indices.barclays/colony

Partnership with DoubleLine®

DoubleLine Capital has a nonexclusive license for the Colony Capital Fundamental US Real Estate Index from Barclays for use in its affiliate funds.

The Colony Capital Fundamental US Real Estate Index (the “Index”) has been licensed by Barclays. Colony Capital is a registered trademark of Colony Capital QIS, LLC or its affiliates. Any investment product that utilizes the Index is not sponsored, endorsed, sold, or promoted by Colony Capital QIS, LLC or any of its affiliates. Neither Colony Capital QIS, LLC nor any of its affiliates make any representation or warranty, express or implied, to the owners of any investment product that utilizes the Index or any member of the public regarding the advisability of investing in securities generally or in any particular investment product or the ability of the Index to track market performance. Colony Capital QIS, LLC’s and its affiliates’ only relationship to any investment product that utilizes the Index is through the sublicensing of certain rules incorporated in the Index and certain trademarks, service marks, and/or trade names owned by Colony Capital QIS, LLC or its affiliates. The Index is not determined, composed, or calculated by Colony Capital QIS, LLC or its affiliates. Colony Capital QIS, LLC and its affiliates have no obligation or liability in connection with the administration, marketing, or trading of any investment product that utilizes the Index. There is no assurance that investment products based on the Index shall accurately track index performance or provide positive investment returns. Colony Capital QIS, LLC and its affiliates are not investment advisors with respect to investors in any investment product that utilizes the Index. Inclusion of a security within an index is not a recommendation by Colony Capital QIS, LLC or its affiliates to buy, sell, or hold such security, nor is it considered to be investment advice.

NEITHER COLONY CAPITAL QIS, LLC NOR ITS AFFILIATES GUARANTEE THE ADEQUACY, ACCURACY, TIMELINESS, AND/OR COMPLETENESS OF THE INDEX, ANY DATA RELATED THERETO, OR ANY COMMUNICATIONS, INCLUDING BUT NOT LIMITED TO, ORAL, WRITTEN, OR ELECTRONIC COMMUNICATIONS WITH RESPECT THERETO AND SHALL NOT BE SUBJECT TO ANY DAMAGES OR LIABILITY FOR ANY ERRORS, OMISSIONS, OR DELAYS THEREIN. COLONY CAPITAL QIS, LLC AND ITS AFFILIATES MAKE NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIM ALL WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR USE, OR AS TO RESULTS TO BE OBTAINED BY ANY PARTICULAR INVESTMENT PRODUCT, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE INDEX OR WITH RESPECT TO ANY DATA RELATED THERETO. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT WHATSOEVER SHALL COLONY CAPITAL QIS, LLC OR ITS AFFILIATES BE LIABLE, WHETHER IN CONTRACT, TORT, STRICT LIABILITY, OR OTHERWISE, FOR ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE, OR CONSEQUENTIAL DAMAGES OR FOR LOSS OF PROFITS, TRADING LOSSES, LOST TIME, OR GOODWILL, EVEN IF THEY HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

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