Role of Real Assets in Portfolio Construction

Last week’s decision to raise interest rates by the Federal Reserve may have had investors wondering what alternatives they have in a rising rate environment.  Jodie Gunzberg, Global Head of Commodities and Real Assets at S&P Dow Jones Indices, offered her insight on how real assets can be incorporated into an investment portfolio in the current economic climate.

Related: Getting Real About Real Assets (Precious Metals, Commodities, Real Estate)

“In the environment where we’re in where interest rates may be rising and inflation may be rising, the kinds of real assets that do the best are commodities,” said Gunzberg.  “And in particular, energy does the best–it’s the most volatile component of CPI.  As interest rates rise, the producers may pull back, which could even be a greater catalyst for energy.”

Gunzberg also offered her insight on the following points:

  • How real assets fit into a portfolio
  • How real asset combinations contribute to inflation protection, diversification, and volatility reduction
  • Her observations on any implementation trends by asset owners and advisors in the United States and Europe that may inform Asian investors as they become more familiar with the potential benefits of real assets
  • How is market access to index-based real asset strategies in Asia is evolving and is there more room for growth

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