Revisiting Neuberger Berman Real Estate Securities Income Fund Inc: A REIT CEF Success Story

This article discusses the Neuberger Berman Real Estate Securities Income Fund Inc, a REIT closed-end fund that has outperformed in the past. The author suggests revisiting the fund, citing its strong performance and attractive yield. The article does not provide specific financial data or investment advice.

Neuberger Berman Real Estate Securities Income Fund Inc (NYSE: NRO) has been a subject of interest for investors and financial professionals alike. Initially covered by Seeking Alpha analysts in a 'Hold' rating, the fund has since outperformed expectations, making it a notable investment in the real estate investment trust (REIT) sector. In this article, we revisit NRO, examining its performance, structure, and outlook.

Performance and Structure

NRO is a REIT closed-end fund (CEF) that invests in a diversified portfolio of real estate stocks. It operates with a high leverage ratio of 25%, making it a turbocharged take on the REIT asset class. This high leverage amplifies both the upside and downside movements of the fund's performance [1].

When rates started rising in 2022, the REIT asset class experienced a substantial drawdown. As of November 2023, the performance of various REIT instruments was as follows: unleveraged ETFs (VNQ, ICF) saw a -21% drawdown, while highly leveraged CEFs (NRO, JRS) experienced a -36% drawdown [1]. This illustrates how leverage magnifies the impact of market movements.

Macroeconomic Outlook

The performance of NRO is closely tied to the direction of 10-year Treasury yields. Higher yields increase borrowing costs for REITs, potentially reducing profitability and putting downward pressure on share prices. Conversely, lower yields make REITs more attractive, driving up prices. The correlation between 10-year Treasury yields and REIT prices is historically strong [1].

As of July 2025, 10-year yields have been fluctuating, impacting the performance of NRO. If long rates are unable to be controlled and deemed unsustainable, NRO could face further downturns. Conversely, aggressive rate cuts by the Federal Reserve could lead to a rebound in NRO's performance [1].

Recent Corporate Actions

NRO has recently raised cash through a rights offering, which is a beneficial long-term action. The fund issued approximately $51.5 million in new shares, helping to deleverage the fund [1]. This move can provide stability and potentially enhance the fund's performance in the long run.

Conclusion

NRO is a high-leverage REIT CEF that has shown strong performance in the past. Its sensitivity to interest rates and 10-year Treasury yields makes it an attractive investment for those with a view on lower rates. However, it is essential to monitor the fund's performance and adjust the investment strategy based on the macroeconomic outlook.

References

[1] https://seekingalpha.com/article/4800121-nro-revisiting-this-reit-cef-maintaining-hold