The following is an excerpt from “Beam Stays Focused on Preferred Shares for Forward Select Income Fund” from REIT Magazine. To read the complete article, CLICK HERE.

Even when Joel Beam, lead portfolio manager for the Forward Select Income Fund (NYSE: KIFAX), takes risks with investments, the risks are mitigated by his preference for preferred shares.

Beam says that the volatility in the real estate market has caused an evolution in the way he and his colleagues invest.

“We are all challenged to be more careful with risk management and also somewhat more conservative,” Beam says. “Now, we are vociferous about the structural characteristics when a new issue comes on the market. For instance, we want protection for the paper if a company goes private, something that wasn’t always in earlier issues. Between the credit crisis and some companies going private, we realized that we need to see our rights articulated.”

When choosing preferred REIT shares, Beam analyzes every angle, including the underlying assets and overall financial stewardship of the company, along with the management acumen.

“The three main elements we look at when analyzing preferred shares are the credit profile, structural characteristics and the pricing,” Beam says.

While Beam naturally prefers to look ahead at future REIT gains, he acknowledges that his fund, along with the rest of the world, have been through a very tough time.

“When we started the Select Income Fund in March 2001, we promised a total return of 8 percent to 9 percent,” Beam says. “I’m proud to say that from a long-term point of view we are in the realm of what we promised, with returns in the low- to mid-8 percent range from the start of the fund until now. Of course, we were well above that, as high as returns in the mid-teens before things started going downhill in June 2007. It was a gut-wrenching experience, yet we came out of it by doing day-by-day, minute-by-minute stewardship of our investments. We repositioned our portfolio and took advantage of the dislocation in the market to invest in some companies that had been too expensive. We’ve all lived through an incredible time and we are so grateful for the support of our investors.”

Morningstar gives the Forward Select Income Fund a four-star rating overall, with a five-star rating for its three-year performance. In addition, Morningstar rates the fund at the lowest level of risk and the highest level of return.