By Philip Lawlor, managing director, Global Markets Research
Like equities broadly, alternative indexes—those that concentrate on a rules-based selections of stocks in areas such as real estate or environmental, social and governance (ESG)—staged a strong rebound in April from March lows. Here, we take a closer look at the recent performances of a handful of FTSE alternative indexes.
First, let’s examine the Environmental Opportunities (EO) series—which tracks the performances of companies engaged in environmental activities, including renewable energy, energy efficiency and waste and pollution control. Amid widespread gains, the US strongly outpaced its country-specific peers, particularly in Japan, and all other categories except the Energy Efficiency index in April. Losses for the year remain in the mid to high teens across the board.
FTSE Environmental Opportunities index series
Source: FTSE Russell. Data as of April 30, 2020. Past performance is no guarantee to future results. Please see the end for important disclosures.
On a relative basis, however, the April rebound only managed to return the US, Japan and Asia Pacific ex Japanese EO indexes back to their market-performer status for the 12-month period. In contrast, the UK and European EOs have remained robust outperformers for the year, despite steep downturns (especially for the UK index) in March.
Regional FTSE Environmental Opportunities Index returns vs home market (rebased, LC)
Source: FTSE Russell. April 30, 2020. Past performance is no guarantee of future results. Please see the end for important legal disclosures.
We found similar patterns for another ESG-related alternative series, the FTSE4Good, which narrows its selections to companies based on globally recognized corporate responsibility standards. The US outperformed its country-specific counterparts in the April recovery (particularly Japan) and trimmed their losses for the year so far.
FTSE4Good Index series
Source: FTSE Russell. April 30, 2020. Past performance is no guarantee of future results. Please see the end for important legal disclosures.
The April rally was far less restorative for the FTSE EPRA/Nareit* global real estate indexes. Massive job losses, travel bans, and shelter-in-place restrictions have been devastating for the sector as a whole, with hotels, shopping centers and malls coming under particularly intense cashflow pressures. The US index posted the strongest gains in April, while its Japanese counterpart lagged. Nonetheless, all of the country-specific indexes are down by 20% or more YTD.
FTSE EPRA/Nareit Global Real Estate Index
Source: FTSE Russell. April 30, 2020. Past performance is no guarantee of future results. Please see the end for important legal disclosures. *Index series is jointly managed by the European Public Real Estate Association (EPRA), FTSE Russell and the National Association of Real Estate Investment Trusts.
In a sharp reversal from their solid outperformances for most of the past 12 months, all but the UK real estate index deeply lagged their home markets in the March downdraft. Only the UK index remains in positive territory so far this year, despite the April bounce.
Regional FTSE/EPRA Nareit index returns relative to home market (rebased, LC)
Source: FTSE Russell. April 30, 2020. Past performance is no guarantee of future results. Please see the end for important legal disclosures. *Index series is jointly managed by the European Public Real Estate Association (EPRA), FTSE Russell and the National Association of Real Estate Investment Trusts.
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