What are the benefits of real assets in a portfolio?

Staci West 08/03/2024 in Specialist investing

Vince Childers, the lead manager of the Cohen & Steers Diversified Real Assets fund, tells viewers why they should consider adding real assets to their portfolio.

Watch the full interview with Vince Childers here.

[00:02] I think the benefits of real assets really start with an understanding of what most investors’ asset allocations are exposed to, to the downside. And that’s primarily inflation shocks or inflation surprises. So, if most people are concentrated in kind of core global equity and bond exposures, when we get nasty inflation shocks, very often those assets stop diversifying each other and exhibit below average returns at the same time.

With real assets that you get a sort of opposite effect typically, where those assets will tend to outperform during these types of inflation shocks. And that opens up a window for real assets to get put into a portfolio, to play a kind of supporting role in the broader asset allocation to modulate or change that negative inflation sensitivity towards something more neutral. And importantly, we think if you can put these assets together in an intelligently diversified way that they can have broader effects of really making the overall asset allocation more efficient, just being in general, more diversifying and make the portfolio a little bit better from a risk return perspective.

And so, effectively, you end up in a situation where putting a little bit into a well-managed, diversified real asset portfolio can maintain return, reduce risk, make the portfolio better overall, and is doing so by being invested in these particularly inflation sensitive asset categories.

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