Institutional investors have long valued diversified real assets to help build portfolio resilience. Now, ever-growing numbers of investors are also looking at real assets to aid their path to net zero.
What are real assets?
At Manulife Investment Management, we think of real assets as tangible investments with intrinsic worth, spanning real estate, land, infrastructure, commodities, precious metals, and natural resources. They’re also vital to society—consider how agriculture, timberland, and real estate innately contribute to meeting basic human needs for food, fiber, and shelter, while infrastructure contributes to essential services.
Real assets are diverse, yet they all share two defining features: Typically accessed through private markets, they may therefore provide an illiquidity premium over mainstream public market investments. Secondly, their intrinsic value is rooted in what’s concrete, enduring, and essential, which tends to make real assets less vulnerable to unexpected changes in inflation, consumer preferences, and global growth.
Real assets represent a large and growing investment subset. These assets have become a rapidly growing allocation for investors searching for sources of long-term income, protection from inflation, and reduced volatility. Forty-nine percent of insurers and 37% of pension funds expect to increase their allocation to real asset strategies going forward, and many real assets are a natural fit for investors wishing to put their capital to work sustainably in ways that generate a positive contribution to society.
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