Current Market Conditions Warrant a Move to Real Assets

More volatility is ahead in 2022, making alternative asset exposure a must. This includes getting real asset exposure that is uncorrelated to the equities market.

Headwinds are more than apparent in the current market landscape. With global inflation mounting and the pandemic still in full swing, it’s difficult to not be nervous in today’s markets, especially when it comes to stock market indexes around the world.

“A global pandemic, inflation and supply chain issues continuing into 2022 are expected to point more investments into real assets, but from there industry experts say the crystal ball gets a bit cloudy,” a Pensions & Investments article says.

One of the areas that will continue to get attention is infrastructure. In the U.S., the trillion-dollar infrastructure bill opened up a wealth of opportunities for investors.

“In infrastructure, investors are expected to continue moving into core strategies, viewing infrastructure as a replacement for low-yielding fixed income and as a buffer for volatility caused by the pandemic, industry insiders say,” the article adds. “Thirty core infrastructure funds worldwide raised a total of $15.6 billion in 2021, compared with 13 value-added infrastructure funds with a combined $36.6 billion and eight opportunistic infrastructure funds with $1.8 billion, Preqin data shows. Preqin has forecasted that infrastructure managers’ assets under management will grow by a compound annual growth rate of 4.5% through 2025.”

“Even three years ago, 70% of infrastructure money raised went to value-add” strategies, said Gordon Bajnai, a London-based partner and head of global infrastructure at placement agent Campbell Lutyens & Co. Ltd.

“Only part of that is COVID-induced,” Bajnai said. “Fixed income is down to negative or very low yield.”

Getting Real Asset Exposure in 1 ETF

aset 1yr

As opposed to holding multiple assets like precious metals or commodities like oil, an exchange traded fund (ETF) can give investors exposure to it all through one position: the FlexShares Real Assets Allocation Index Fund (ASET). Additionally, volatility is minimized due to ASET holding companies that represent real asset exposure instead of the actual tangible assets themselves.

ASET seeks investment results that correspond generally to the price and yield performance of the Northern Trust Real Assets Allocation IndexSM. The underlying index measures the performance of an optimized allocation to the underlying funds that is intended to provide exposure to certain real assets and minimize the overall volatility of an investment in the underlying funds.

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