Assets that offer real opportunities for investors (and PRs)
As much as Donald Trump’s public relations faux pas regarding Gold Star parents has dominated the headlines, we must hope that the real focus will be on the more serious issues as the presidential election progresses.
Differences between the candidates’ economic policies will be intensely scrutinised. However, whoever wins, one outcome is certain: they will have to spend heavily on America’s crumbling infrastructure.
This may well serve to highlight opportunities in one of the strongest themes set to dominate the investment arena globally for many years – real assets, of which infrastructure is a major component.
Real assets have been of increasing interest to investors for some time, not least because of the diminishing returns delivered by traditional asset classes such as equities and bonds. They include infrastructure such as roads and bridges but also farms, forestry, ports, renewable energy installations such as dams and solar/wind parks.
Investors’ interest in real assets was certainly boosted by the fallout from the global financial crisis. The economic recession, massive quantitative easing and the focus on governments, companies and consumers to tighten their belts have all helped to push down interest rates and dampen the returns on equities.
This has created an unprecedented investment landscape and a need for investors to find alternatives to traditional asset classes.
Real assets are uniquely positioned to provide value and enhance overall risk-adjusted returns in a broad range of market environments. Their performance has little correlation to that of equities and bonds and they can provide stable, inflation-proof income as well as the potential for capital growth. This combination of attributes makes real assets an attractive core holding for investors.
We can expect extensive opportunities for investments in real assets for many decades. For example, global population expansion will spur economic growth and with it, strong demand for infrastructure, commodities and energy. More farmland will also be needed to provide the 60% rise in calorific output that will be needed over the next 40 years to feed a global population set to rise, according to the United Nations, to nearly 10 billion by 2050.
All of this translates into a huge demand in investment requirements, beyond the reach of public financing alone.
The potential to develop PR initiatives around the real assets theme is enormous. The scope for research projects, white papers, public debates and project launches and deals in an area that lies at the forefront of human development is virtually limitless. It is also a story with plenty of positive messages, which PRs always welcome: investors will have opportunities to secure good returns by investing in projects that will provide material benefits to mankind while addressing the all-important task of reducing global warming.
Written by Stephen Sheppard, Director
asset management, business, Donald Trump, Finance, Financial services