Real Assets

Key Highlights

• Real Assets are tangible, physical assets that hold inherent value due to their substance and properties, rather than based on contractual claims.

• Types of real assets includes real estate, infrastructure, commodities and natural resources.

Real Assets

Real Assets are tangible, physical assets that hold inherent value due to their substance and properties, rather than based on contractual claims. These include real estate, infrastructure, commodities, and natural resources, which serve as vital components in diversified investment portfolios.

Key Characteristics

• Intrinsic Value: Derived from their physical existence and utility.

• Inflation Hedge: Often maintain or increase value during inflationary periods.

• Stable Cash Flows: Many real assets, such as infrastructure and real estate, generate steady income through rent, tolls, or usage fees.

• Low Correlation: Typically exhibit low correlation with traditional financial assets like equities and bonds, offering portfolio diversification benefits.

Types of Real Assets

• Real Estate: Commercial, residential, and industrial properties.

• Infrastructure: Roads, airports, power plants, and digital networks.

• Commodities: Physical goods such as gold, oil, or agricultural products.

• Natural Resources: Timberland, mining rights, or energy reserves.

Benefits of Real Assets

• Provides portfolio resilience against market volatility.

• Enhances income generation through tangible asset ownership.

• Acts as a store of value during economic downturns.

• Contributes to sustainable investment frameworks, especially in infrastructure and renewable energy sectors.

Risks and Challenges

• Liquidity Risk: Real assets often require longer timeframes to buy or sell compared to equities or bonds, leading to capital lock-in during market downturns.

• Valuation Uncertainty: Infrequent transactions and lack of standardized pricing can make valuation less transparent, especially in private or alternative markets.

• Regulatory and Political Risk: Infrastructure and resource-based assets are subject to policy changes, land laws, and government approvals that can affect returns.

• Operational and Management Risk: Performance can depend on maintenance, utilization, and management efficiency - particularly in real estate and infrastructure investments.

• Market and Economic Cycles: Economic downturns, interest rate changes, or commodity price volatility can impact asset values and cash flow stability.