Real Estate Fund AEW Capital’s 13F Holdings Boast Solid Gains

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Founded in 1981, Boston-based AEW Capital Management is one of the leading real estate funds on the Street today. For the last 15 years, the fund has been headed by Jeffrey Furber, who joined AEW in 1997 after serving as the Managing Director of Winthrop Financial Associates. At the end of 2015, the fund managed approximately $34 billion of investors’ money and its U.S. equity portfolio was worth $4.77 billion. Although AEW Capital Management’s US equity portfolio represents only a fraction of its total assets under management, its stock picks in the real estate sector have been performing really well this year. Our analysis of the fund’s 13F holdings in companies worth at least $1 billion showed that the 43 long positions held by AEW Capital Management delivered a weighted average return of 6.2% during the first quarter, compared to the near flat returns generated by the broader market during the same period. Since the fund’s stock selection is working, in this article, we are going to take a look at five of its major holdings that have performed really well this year.

We track prominent investors and hedge funds because our research has shown that historically their stock picks delivered superior risk-adjusted returns. This is especially true in the small-cap space. The 15 most popular small-cap stocks among a select group of investors delivered a monthly alpha of 80 basis points between 1999 and 2012 (see the details here).

Warren Buffett
Warren Buffett
Berkshire Hathaway

Let’s start with Welltower Inc (NYSE:HCN), in which AEW Capital Management increased its stake by 48% to 3.77 million shares during the fourth quarter. With ownership of 2.08 million shares of Welltower Inc (NYSE:HCN), Jim Simons‘ Renaissance Technologies trailed AEW Capital Management as the largest shareholder of the company among funds tracked by us at the end of December. Shares of the Ohio-based real estate investment trust (REIT) suffered a 15% decline in mid-February after HCP, Inc. (NYSE:HCP), another REIT, issued soft guidance for fiscal 2016. However, they recovered quickly after the company reported its own quarterly numbers and ended the first quarter with gains of 3.3%. The REIT currently pays a quarterly dividend of $0.86 per share, which translates into an attractive annual dividend yield of nearly 5%. According to analysts who track REITs, Welltower Inc (NYSE:HCN) is a great long-term holding, but its stock is currently fairly valued and has an immediate risk to the downside and hence investors should wait for a correction before buying the stock.

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