Global Real Estate Diversification: A Structural Shift in 2025-2026

The choice between HAUZ and REET is not a minor tactical decision; it is a fundamental structural question about where to anchor a portfolio's real estate exposure. At its core, this is a divergence between a globally diversified property fund and one that remains tightly coupled to U.S. REIT dynamics. The answer defines whether an investor seeks to mirror the American property market or to introduce exposure that moves on a different economic timetable.

HAUZ provides a pure tilt toward non-U.S. property cycles. It tracks an index of real estate securities across developed and emerging markets, explicitly excluding the U.S., Pakistan, and Vietnam. This construction delivers broad geographic diversification, with significant weights to companies in Australia, Japan, and Europe. The result is a fund whose performance is less tethered to Federal Reserve policy and U.S. commercial real estate sentiment. Instead, it is exposed to a mosaic of regional demand drivers and interest-rate paths, offering a potential hedge against a U.S.-centric downturn.

REET, by contrast, is a U.S.-anchored global fund. While it tracks a global index, its top holdings-Welltower, Prologis, and Equinix-represent massive U.S. REITs that dominate the benchmark. This concentration means the fund's behavior is heavily influenced by the health of the U.S. property market and the direction of U.S. interest rates. Its performance has historically mirrored that of U.S. REITs, providing scale and liquidity but also introducing a clear dependency on American economic cycles.

This structural difference becomes the central investment dilemma in a shifting macro environment. As global monetary policies diverge and regional economies experience different growth trajectories, the performance of these two funds is likely to decouple. An investor choosing HAUZ is betting on the resilience and growth of non-U.S. property markets. Choosing REET is effectively choosing to maintain a core position in the U.S. real estate story, even within a global wrapper. The decision hinges on whether true global diversification requires breaking the link to U.S. cycles or if that link is the very feature that provides stability and familiarity.

The 2025-2026 Catalyst: A "Corrugated" Global Recovery

The external environment for real estate is one of conflicting signals, a "corrugated" recovery where dealmaking improves but faces a complex monetary landscape. This dynamic creates a fertile ground for a strategy focused on domestic resilience and valuation. The key catalyst is a potential reversal in the historic discount that U.S. REITs trade at versus the broader market. With U.S. REITs priced at a -2.79x earnings multiple discount to U.S. stocks, the setup mirrors periods that have preceded outperformance. Historically, such a gap has led to REITs outperforming by 2%-4% annually. This valuation disconnect, combined with a domestic revenue base that insulates them from global shocks, positions a U.S.-focused REIT strategy to benefit from a stabilization in capital markets.

Yet the path is not smooth. The primary headwind is the monetary policy crosscurrents. While some regions see rates declining, the U.S. faces a more uncertain trajectory. The Federal Reserve has signaled a pause after recent cuts, with officials divided on the pace of further reductions. The minutes from its December meeting showed a clear split, with some members advocating for a wait-and-see approach to gauge the economy, while others pushed for more aggressive easing to counter a weakening labor market. This uncertainty directly pressures property valuations, as higher rates constrain the funding environment. Commercial real estate leaders have consistently cited high interest rates as a top concern, with that sentiment intensifying in the second half of 2025.

A notable and specific risk is the impact of tariffs. The DLA Piper survey found that 54 percent of respondents predicted current and proposed tariffs will have a negative impact on the sector, with 16% anticipating a "very negative" effect. This is a material tailwind for a strategy that emphasizes domestic, needs-based sectors like healthcare and residential, which are less exposed to trade disruptions. In contrast, industrial and retail property sectors, which are more integrated into global supply chains, face direct pressure.

The bottom line is a story of selective opportunity. The "corrugated" recovery means not all real estate assets will benefit equally. A strategy that leverages the deep valuation discount of U.S. REITs, their domestic revenue shield, and a focus on resilient asset classes is well-positioned to capture the rebound in capital markets activity. However, it must navigate the persistent headwinds of elevated interest rates and the specific risks posed by trade policy. The catalyst is a narrowing of that earnings multiple gap, but the journey will be shaped by a complex and uneven global recovery.

Performance and Risk-Adjusted Returns: Testing the Diversification Thesis

The structural differences between these two global real estate ETFs are not just academic; they translate directly into divergent performance and risk profiles. Over the trailing 12 months, the geographic tilt of HAUZ has delivered a commanding return advantage, with the fund posting a 23.17% return compared to REET's 8.66% return. This outperformance is the financial manifestation of its strategy: by distributing exposure more evenly across developed markets outside the U.S., HAUZ captured regional real estate cycles that were less tethered to the U.S. REIT market's recent path.

More importantly, this higher return came with significantly less volatility. HAUZ exhibits superior risk-adjusted performance, a critical metric for portfolio construction. Its Sharpe ratio of 1.71 is more than double REET's 0.60, indicating it generated its returns with far less risk per unit of return. The fund also weathered downturns better, with a maximum drawdown of -39.51% versus REET's -44.59%. This resilience stems from its broader geographic diversification, which reduces reliance on any single property market and introduces cycles that respond to different economic and policy forces.

Yet the trade-off is clear. REET brings scale and liquidity that HAUZ cannot match. With $4.04 billion in assets under management versus HAUZ's $940.7 million, REET offers deeper trading liquidity and greater institutional familiarity. Its portfolio is also more concentrated, with top holdings like Welltower and Prologis anchoring its performance to the U.S. REIT market. This concentration can be a double-edged sword, providing stability in some environments but amplifying losses when U.S. real estate sentiment turns.

The dividend profiles also reflect their different structures. HAUZ offers a slightly higher dividend yield of 3.91% compared to REET's 3.7%, a modest premium that aligns with its broader, potentially higher-yielding international holdings. However, the key divergence is in risk-adjusted efficiency. For an investor seeking to tilt away from U.S. real estate cycles and capture returns from a more globally diversified basket of property companies, HAUZ's superior Sharpe ratio and lower drawdown make a compelling case. The thesis is tested and validated: geographic diversification, when executed through a broader index, can indeed deliver better risk-adjusted outcomes.

Strategic Takeaway: Aligning with Investor Profiles

The current macro landscape-marked by divergent global monetary policies and a resilient, AI-driven U.S. economy-creates a clear bifurcation for real estate investors. The choice between a global diversifier and a U.S.-centric anchor is not merely tactical; it is a strategic alignment with distinct risk-return profiles.

For the Global Diversifier, the strategic choice is HAUZ. This ETF offers direct exposure to a $2.04 trillion global REIT market, providing a critical buffer against U.S. policy and economic volatility. The key advantage is the ability to participate in non-correlated growth cycles and rental market dynamics across regions. When the Fed is on hold, central banks in Europe or Asia may ease, creating offsetting return dynamics. This diversification is particularly potent given that the U.S. REIT market comprises only about 63% of the global developed index. Active management is key here, as the global REIT opportunity set is less efficiently priced, offering a consistent edge for skilled managers.

For the U.S. REIT Anchor, REET provides a globally diversified portfolio with a significant domestic core. This structure leverages the sector's inherent defensive characteristics, with U.S. REITs generating nearly 90% of revenue domestically and thus being more insulated from global trade disruptions. The valuation gap is compelling, with U.S. REITs trading at a -2.79x earnings multiple discount to U.S. stocks. Historically, such wide discounts have preceded outperformance. This ETF allows investors to maintain a U.S. anchor while still capturing some of the diversification benefits of global exposure.

The key watchpoints for both profiles center on the Fed's policy path and the dispersion in global real estate transaction volumes. The market expects transaction volumes to grow for a third consecutive year in 2026, which should limit the impact of any credit stress from the last cycle. However, the pace of this recovery and the specific regional winners will be critical. For the global investor, currency movements and local regulatory frameworks will be decisive. For the U.S. anchor, the stability of domestic demand and the pace of capital reengagement in specific sectors like industrial and multifamily will determine the path to outperformance.

The bottom line is a matter of portfolio construction. In a world of policy divergence, the Global Diversifier seeks to smooth returns and access higher-growth trajectories abroad. The U.S. REIT Anchor seeks to capitalize on a deep valuation discount and defensive cash flows within a resilient domestic economy. Both strategies are valid, but they require different sets of assumptions about the global macro environment.