Investments + Services
Introduction to Real Asset Investments
Real Asset Investments, commonly referred to as hard asset or alternative investments, have been the focus of our firm since inception.
Real Assets include real estate, energy, timber, infrastructure, commodities and precious metals. Although most investors are familiar with one or more of these through traded investment vehicles, we focus on identifying direct investment opportunities in order to allow investors to fully realize the potential benefits of the underlying asset.
We spend a great deal of time with our clients, educating and explaining the strategic rationale for investing in real assets, today’s opportunities, the risks involved and how we can work to mitigate those risks.
While real asset investments may have many attractive attributes, one in particular tends to lead most investors in the initial investigation or investment; returns. An allocation to real assets is likely to enhance the return of one’s portfolio. During periods of modest inflation, most real assets can be expected to produce returns equal to, or greater than, traditional asset classes. Over the past decade direct real asset investment returns have generally exceeded those of traditional investments, such as stocks and bonds. In fact, during times of inflation when stocks and bonds have performed poorly, Real Assets have historically provided attractive returns.
The inclusion of real assets in one’s portfolio also contributes a second benefit: valuable diversification and volatility reduction for the overall portfolio. Unlike most traditional asset classes and even equity-based hedge funds, most inflation hedges have modest or negative correlations with stock and bond market returns. This means that adding an allocation to inflation hedges will reduce the volatility of returns from a portfolio.
Inflationary concern is another influence on the investigation for inclusion of real assets in an investment portfolio. History shows us that inflation is one of the greatest threats to any long-term investment portfolio, due to high inflation reducing the purchasing power of the underlying portfolio. However, real assets can provide a measure of protection against inflation and sustained periods of general price increases, whether expected or unexpected.
While this summary can only serve as a high level introduction, we hope you see the advantages an allocation to real assets may provide, such as the potential for better returns, increased diversification, reduced volatility and a measure of protection against inflation.
We look forward to an opportunity to discuss in further detail – In the meantime, for more specific information about Real Asset Investments, please visit the links below.
Diversification cannot eliminate the risk of investment losses. Different types of investments involve varying degrees of risk including market fluctuation and possible loss of principal value. There can be no assurance that any specific investment strategy will be profitable.
Annualized returns data: Cambridge Associates LLC Energy Upstream & Royalties and Private Equity Energy Index; NCREIF Timber; Macquarie all unlisted infrastructure funds; S&P500; MSCI EAFE; US Corporate Bonds/Barclays Capital Aggregate US Bonds. Periods covered: Private Infrastructure 9 years as of September 30 2009, Private Energy 10 years as of March 31, 2009, Timber and public indices last 10 years as of June 30, 2009, Corporate Bonds 1987-2009.
Correlation data was sourced via Altius from NCREIF, Merit Energy Company, P&I, Yahoo Finance, Bloomberg, Federal Reserve, and Dow Jones. Indices used: Public Infrastructure/Dow Jones Brookfield Index; Timber/NCREIF Timber; Energy/Ibbotson Direct Energy Index; US Corporate Bonds/Barclays Capital Aggregate US Bonds; US Equity/S&P500; Non-US Equity/MSCI EAFE; Cash/US 90-day T-Bill. Period covered: Timber/1987-2009; Direct Energy/1970-2004; Infrastructure/2003-2009.
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