A look at private real assets for institutional and retail investors

A new note from Manulife Investment Management says private real assets would be a valuable addition to any investment portfolio today because a diversified portfolio of private real assets offers a compelling mix of diversification, inflation protection and sustainable investment opportunities.

Entitled Diversified private real assets: real diversification with the potential for sustainable outcomes, they say both retail and institutional investors should consider a strategic allocation to the asset class, as both near and long-term factors may boost values. They also say investing across a range of private real assets provides return potential that is uncorrelated with traditional asset class returns. Inflation hedging and access to sustainability efforts are also noted.

An opportune moment 

“We believe now is an opportune moment to take advantage of key tailwinds that may support private real assets. Policy-rate inflection points are the nearest-term factor to consider. Longer term, we see themes such as the growth of artificial intelligence (AI) and sustainable investment outcomes as supportive of real asset values.” 

The note discusses interest rates, real estate and infrastructure assets. In real estate, they say “as financing becomes more accessible, that may help lift capital appreciation potential and increase transaction volumes. We believe this could produce a meaningful tailwind for the sector and, consequently, we think it’s a timely moment to consider deploying capital into this segment,” they state.

Renewables and technology 

Infrastructure, meanwhile, is expected to benefit from investment in renewables and technology – they say long-term investment themes such as digitalization and AI may affect private real assets in unique ways. The note also looks at the potentially higher levels of capital market activity and focuses also on aging infrastructure.

“At the moment, the stage is set for a broadening interest-rate-cutting cycle in developed markets and a downward drift in global yields,” they conclude. “We believe an allocation to this segment of the private markets would be a valuable addition to any investment portfolio.”