Play More Than The Illiquidity Premium With Real Assets
Real assets help achieving different needs through diversification, from inflation hedge, volatility dampener, to substitute to fixed income. We believe the macro economic and financial conditions appear very favourable to real assets in 2018.
In the institutional world, we have witnessed an impressive shift toward unlisted illiquid assets, with $700 billion of capital raised in 2017 for private equity, real estate, private debt and infrastructure. The assets under management of those asset classes have reached a record high of $8,3 trillion in 2017 and PwC estimates that so called ‘alternative’ assets will reach between $13.6 and $15.3 trillion in 2020.
Unconventional monetary policies and low rates have had a significant impact on institutional portfolios. The economic cycle is now moving to a late phase and the bull market is in its maturity phase with very pricey equities. In that context, real assets are appealing to those investors with long-term horizon, not only as a mean to capture the famed illiquidity premium, but also as a source of income enhancement (i.e. stable predictable return) or as a tool for diversification (i.e. low correlated return to traditional as- set classes).
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