Real Assets
Physical and infrastructure-linked exposures considered for their income characteristics and inflation sensitivity.
Purpose
Real assets, including property, infrastructure and related exposures, are held for characteristics that differ from financial assets: contracted income, physical scarcity and, in some cases, revenue that adjusts with inflation. Those characteristics vary considerably by sector and structure.
Approach
- 01
Separate the asset from the wrapper: listed, unlisted and direct exposures behave differently.
- 02
Examine the contractual basis of income and the counterparties behind it.
- 03
Assess capital expenditure requirements and the leverage employed at asset and vehicle level.
- 04
Test inflation linkage explicitly rather than assuming it.
Where it fits
Income, diversification and potential inflation sensitivity.
- Portfolios seeking income characteristics distinct from listed equity and credit.
- Long-horizon capital where inflation sensitivity is a stated consideration.
Risk considerations
- Real assets can be illiquid, capital-intensive and sensitive to interest rates and financing conditions.
- Inflation linkage is contractual and partial where it exists; it is not a hedge in all conditions.
Next capability
Risk Management
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