IGR Vs. AWP: What’s A Yield Worth?
CBRE Clarion Global Real Estate Income Fund and Alpine Global Premier Properties Fund both provide access to global real estate. However a comparison between the two brings up an interesting distinction on the distribution front. Do you want yield at the expense of NAV growth or yield and NAV growth? I was recently asked to take a look at the CBRE Clarion Global Real Estate Income Fund (NYSE: IGR ). IGR is a CEF that focuses, as its name implies, on real estate across the globe. This, inevitably brings with it a comparison to a fund like the Alpine Global Premier Properties Fund (NYSE: AWP ). At the core, they both do similar things and could, arguably, be interchangeable. However, income seekers might be drawn to AWP’s nearly 9% yield over IGR’s lower 6.5% yield. And why not, since they do about the same thing? A lot alike In fact, both have similar discounts right now, with each floating around a mid-teens discount to net asset value. So either one would be cheap. Performance is a bit of mixed bag, however, with IGR outdistancing AWP over the trailing five years through May on an NAV total return basis, which includes reinvested dividends. But AWP beating IGR over the trailing three years. More recently, AWP has handily outperformed, posting a year to date gain of nearly 7% versus a 1.5% decline at IGR’s (both including distributions). Looking at standard deviation, a measure of price volatility, IGR was less volatile over the trailing five years and roughly equally volatile over the trailing three years. So it’s hard to make much of a distinction on this point between the two. That said, both make use of leverage , but they have each kept that to a relatively low level recently at around 6% of assets. Cost wise, IGR has a slight edge . It’s expense ratio is roughly around 1.15%. AWP’s expense ratio is a little higher at around 1.3% or so. Neither, however, is so high that they stand out. So here are two funds with roughly similar objectives. Both are trading at steep discounts. But AWP has a notably higher yield and has been performing better of late. The easy answer is buy AWP. That said, you wouldn’t be buying a bad fund if you chose IGR. Pick your poison? Things aren’t that simple, however. And a quick look at the distributions helps explain why. Since it’s IPO in 2004 , IGR has paid investors over $13 worth of distributions. The IPO NAV of the CEF was $14.10. True, the shares currently trade below that level, with an NAV of close to $9.50, but for income investors the benefit has been fairly large despite the NAV decline. Alpine, meanwhile, started life in 2007 with an NAV of around $19 a share. It’s net asset value is roughly $7.50 a share more recently. It’s distributions over that span have been around $6.50 a share. I’m rounding in both cases, but the point should be pretty clear. But just for fun, if you add the current NAV to the total distributions received for both funds you get around $23 for IGR and nearly $16 for AWP. Since IGR had an NAV at IPO of around $14 and AWP’s NAV at IPO was a touch over $19, which one has been the better option? Since 2007 was a pretty awful time to open a fund that may not be a completely fair comparison. But the same trend holds true over shorter periods, too. Let’s look since 2010 instead (using fiscal years for AWP). Over that span, AWP’s NAV has gone from roughly $7.25 a share in October of 2009 (the end of its fiscal year) to $7.50 a share. It’s paid out around $3.75 in distributions. IGR, meanwhile, has seen its NAV go from about $7.50 at the start of 2010 (it’s fiscal year ends in December) to about $9.50. Meanwhile it’s paid out about $2.90 a share in distributions. If all you are looking for is income, yes, AWP paid out more in distributions. But at the cost of NAV growth, since the NAV rose only about 3% over the span. With IGR, there was less income, but your principal grew by around 25%. In other words, if you buy AWP, your return is almost all in the distribution. That’s fine during good times, but when there’s a bad market it makes building back the NAV that much harder to achieve and can result in distribution cuts if the downturn is long enough. Your call, but I like conservative At the end of the day, which option is better for you really depends on your situation and temperament. If you only care about income, AWP is the clear winner. For me, I’d prefer a fund with a lower yield and net asset value growth. So, there’s reasons to like AWP over IGR, but I’d go with the more conservative distribution if I were making the choice. Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More…) I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.