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When interest rates are low, investors are drawn to sectors such as utilities and real estate.

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So far this year, “the bid on utilities and REITs has been there due to their higher-yield nature,” and that has made them pricey compared to their historic valuations, says Peter Hardy, vice president and portfolio manager at American Century Investments in Kansas City, Missouri. His firm manages the Renaissance U.S. Equity Income Fund.

“However, because interest rates have been somewhat volatile, both sectors have underperformed [in the U.S.] in 2015,” he adds. “At the margin, the team has added to our utilities exposure, while maintaining our underweight in REITs.”

Read: Cut exposure to REITs, utilities

Going forward, says Hardy, “We don’t know whether rates are going to stay low for longer, given short-term interest rates in the U.S. especially have been at [near] 0%,” as a result of the Federal Reserve’s monetary policy strategy. As rates start to rise and normalize, he predicts, sectors such as utilities and real estate will continue to be impacted.

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In the meantime, Hardy finds some REITs have withstood today’s tenuous interest-rate environment better than others. “We’ve added to a timber REIT called Weyerhaeuser. Timber REITs are not as interest-rate-sensitive as other publicly traded real estate companies. And, the yield is somewhat more stable.”

Overall, his biggest additions have been to major technology and healthcare names, such as Procter & Gamble, and to the consumer staples sector.

Read: Which sectors benefit from low rates?

Hardy says he’s looking for securities that are underperforming relative to the market, “but [that] still have business stability and quality characteristics from a business standpoint.”

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Originally published on Advisor.ca

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