Published by QMA
Real assets have found a place in the strategic asset allocation mix of most institutional investors and can play multiple roles in a diversified portfolioincluding total return potential, diversification from low correlations, and inflation sensitivity. These benefits vary across the sub-asset classes, and its important for investors to gain a better understanding of the benefits and risk profiles of each when building the components of an overall real assets strategy.
Adding real assets as a complement to traditional asset classes requires a well-defined investment objective, as well as a clear plan for implementation, including the size of the real assets allocation within the overall portfolio, the mix of real assets exposures, and the vehicles by which these exposures will be deliveredwhether they be sourced directly, through a diversified liquid fund of real assets, or some combination of the two.
Investors can choose to build their own real assets portfolio through a combination of direct exposuressuch as direct real estate or natural resources ownership. While this approach has its merits, it requires considerable expertise and staff to manage. Liquid real assets can provide more efficient implementation for a wider range of institutional investors. Allocating to such a strategy offers greater liquidity, improved diversification, and a single fee structure. These funds also provide even the most sophisticated real assets investors new ways to complement private real asset strategies they may have had in place for decades.