Real asset investors should be aware of limitations

real-assets/Zenith-Investment-partners/infrastructure/dugald-higgins/

24 January 2020
| By Oksana Patron |
image
image
expand image

Investors interested in real assets should know the limitations of this asset class to better exploit growth potential, according to Zenith Investment Partners’ sector review.

The review found lower volatility that characterised real assets, which generally comprised private market (unlisted) investments, could create a paradox for unwary investors.

Dugald Higgins, Zenith’s head of real assets and listed strategies, said that reducing volatility was not the same as reducing risk.

“Risk should be viewed as permanent capital loss, not volatility. Structural aspects of real assets such as long investment timeframes, illiquidity and leverage, work to heighten complexities and risk at the individual fund level,” he said.

Aside from real assets fundamentals, one of the most powerful diversifying attributes was the low correlation to liquid assets. However, Higgins warned, a significant driver of this characteristic was low liquidity with fund liquidity generally mirroring that of the underlying assets.

“While sacrificing liquidity can be profitable, liquidity mismatch is inherent for vehicles that offer short-term redemptions while investing in long dated assets,” he added.


Over the 12 months to 31 October, 2019, Zenith’s universe of rated real assets funds returned an average of 10.65% p.a. over five years (net of fees) with an observed volatility of 3.6% p.a.

Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest news and developments in wealth management industry

MARKET INSIGHTS

So we are now underwriting criminal scams?...

1 month 4 weeks ago

Glad to see the back of you Steve. You made financial more expensive, not more affordable as you claim, and presided ...

2 months ago

Completely agree Peter. The definition of 'significant change is circumstances relevant to the scope of the advice' is s...

4 months ago

Entireti has unveiled the new name for the AMP financial advice businesses that it acquired last year....

3 weeks 5 days ago

A Sydney financial adviser has been permanently banned from providing any financial services, with the regulator deriding his “lack of integrity, trustworthiness and prof...

2 weeks 4 days ago

Minister for Financial Services, Stephen Jones, has provided further information about the second tranche of the Delivering Better Financial Outcomes (DBFO) reforms....

1 week 3 days ago

TOP PERFORMING FUNDS