Real assets: Difference between revisions

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Real Assets is an investment asset class that covers investments in physical assets such as real estate, energy, and infrastructure. Real assets have an inherent physical worth.^[1] Real assets differ from financial assets in that financial assets get their value from a contractual right and are typically intangible.

Real assets are categorized into three categories:

Real Estate: REITs, commercial real estate, and residential
Natural Resources: Energy, Oil & gas, MLPs, timber, agriculture, solar, mining, and commodities
Infrastructure: Transportation (roads, airports, railroads), utilities, telecommunications infrastructure

Real assets are appealing to investors for four reasons: high current income, inflation protection / equity appreciation, low correlation to equity markets, and favorable tax treatment.^[2]^[3]^[4]

References

^ Some investment professionals have argued that intellectual property (such as royalties and patents) and insurance (life and annuities) should be included as real assets.
^ For example, in the United States, REITs are treated as pass-through vehicles and not taxed at corporate level. In the case of exploration & development for oil and gas, there is accelerated depreciation.
^ "Real estate investment trust", Wikipedia, 2019-09-24, retrieved 2019-10-08
^ Cussen, Mark P. "Oil: A big investment with big tax breaks". Investopedia. Retrieved 2019-10-08.

[1] Some investment professionals have argued that intellectual property (such as royalties and patents) and insurance (life and annuities) should be included as real assets.

[2] For example, in the United States, REITs are treated as pass-through vehicles and not taxed at corporate level. In the case of exploration & development for oil and gas, there is accelerated depreciation.

[3] "Real estate investment trust", Wikipedia, 2019-09-24, retrieved 2019-10-08

[4] Cussen, Mark P. "Oil: A big investment with big tax breaks". Investopedia. Retrieved 2019-10-08.

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 Real assets are appealing to investors for four reasons: high current income, inflation protection / equity appreciation, low correlation to equity markets, and favorable tax treatment.<ref>For example, in the United States, REITs are treated as pass-through vehicles and not taxed at corporate level. In the case of exploration & development for oil and gas, there is accelerated depreciation.</ref><ref>{{Citation|title=Real estate investment trust|date=2019-09-24|url=https://en.wikipedia.org/enwiki/w/index.php?title=Real_estate_investment_trust&oldid=917623872|work=Wikipedia|language=en|access-date=2019-10-08}}</ref><ref>{{Cite web|url=https://www.investopedia.com/articles/07/oil-tax-break.asp|title=Oil: A big investment with big tax breaks|last=Cussen|first=Mark P.|website=Investopedia|language=en|access-date=2019-10-08}}</ref>
-== Public Equity Investing in ETFs ==
-Historically investors have gained exposure to this asset via investing in underlying strategies such as [[REIT]]s or utilities. However, in the past few years, several public funds have been started. The benefit to the individual investor for investing into a single real asset fund to get exposure into the asset class is immediate diversification at a low cost. The two major ETFs in the real asset space are:
-* '''Virtus Real Asset Income ETF (Ticker: VRAI)]:'''<ref>[https://www.virtus.com/products/virtus-real-asset-income-etf#shareclass.700/period.quarterly]</ref> This is the dominant ETF in the asset class. VRAI is a diversified portfolio of income-producing real asset equity securities. VRAI does not invest in commodities because they do not generate income.
-* '''SPDR SSGA Multi-Asset Real Return ETF (Ticker: RLY):'''<ref>{{Cite web|url=https://us.spdrs.com/en/etf/spdr-ssga-multi-asset-real-return-etf-RLY|title=RLY: SPDR SSGA Multi-Asset Real Return ETF, Asset Allocation {{!}} SSGA SPDRS|website=us.spdrs.com|access-date=2019-10-08}}</ref> This is an ETF of ETFs, This ETF includes commodities, gold, and traditional fixed income (TIPS).
-For investors interested in comparing these two ETFs, Indxx did a write-up in October 2019 (https://www.indxx.com/assets/media/press/Real_Asset_ETF_Bake_Off.pdf).
-On the mutual fund side, real asset funds include [https://www.nuveen.com/mutual-funds/nuveen-real-asset-income-fund?shareclass=I Nuveen Real Asset Income Fund], [https://www.troweprice.com/personal-investing/tools/fund-research/PRAFX T Rowe Price Real Assets Fund], and [https://fundsus.dws.com/us/en-us/products/mutual-funds/dws-rreef-real-assets-fund.html DWS REEF Real Assets Fund].
-In additional several of the largest investment firms have launched private real asset investment strategies for institutional investors. This includes [[Carlyle Capital|Carlyle]], [[Kohlberg Kravis Roberts|KKR]], and [[Oaktree Capital Management|Oaktree]].
 ==References ==