RCurrent inflation and the lingering economic risks of Covid-19 make diversification even more imperative by the end of 2021 and into 2022, a good time for exposure to real assets.
Exposure to real assets can give portfolios uncorrelated assets that do not keep pace with the stock drum. This is particularly the case when it comes to institutional investment strategies.
“We believe that real assets can play a long-term strategic role in the diversified portfolios of a wide range of institutional investors, from defined benefit plans to endowments and foundations to defined contribution plans.” noted Rob Guiliano, Senior Portfolio Manager at State Street Global Advisors’ Investment Solutions Group.
“The problem today is that we have been through a prolonged period of decline and low inflation where traditional asset classes have performed extremely well,” added Guiliano. “The conversation we have now with clients is that expectations for stocks and bonds have come down considerably, while inflation could be structurally higher. So what are the implications for your portfolio? potential return? We suggest looking to other assets and asset classes, especially real assets, to help complement traditional exposures to equities and bonds. ”
Several real assets, one fund
There are a plethora of options when it comes to gaining actual exposure to assets. However, an easier way is to allocate in a fund that does everything through the FlexShares Real Asset Allocation Index Fund (ASET)
ASET seeks investment results that generally match the price and performance of the Northern Trust Real Assets Allocation IndexSM. The underlying index measures the performance of an optimized allocation to the underlying funds which aims to provide exposures to certain real assets and to minimize the overall volatility of an investment in the underlying funds.
As of November 19, the top three sector allocations include real estate, industry and utilities. In addition, ASET takes a holistic approach by also investing in countries other than the United States, including Canada, United Kingdom and Japan, which offers even more diversification.
30% of the fund is currently allocated to real estate where prices continue to rise as demand increases, but supply remains low. This should continue to generate earnings for the fund in the future; currently the fund is up 14% for the year.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.