Real assets the new source of income: JPMAM
Investors concerned about the illiquidity of real assets should be reassured longer periods of investment could lead to higher returns as real assets are identified as the new source of income.
In a J.P. Morgan Asset Management webinar, the firm said it was seeing increased interest from high net worth investors (HNWs) in real assets. The asset class had previously been mostly used by institutional investors but low interest rates meant it was now being considered by individual investors as a source of income.
“We are seeing more interest from HNWs in using real assets for income. They are recognising income is not as easily found anymore so they need to find new sources,” said global market strategist Kerry Craig.
Interest rates in Australia were reduced to 0.25% earlier this year and Reserve Bank of Australia governor Phil Lowe said they would likely remain at this rate for several years.
“In a world of 0% interest rates, real assets offer income. That income comes with lower equity beta where they are non-correlated with equity markets. Core alternatives do come with the cost of illiquidity but there aren’t long lock-ups anymore. In alternatives, there are always varying levels of liquidity, it’s not a binary construct,” said Pulkit Sharma, head of real assets and alternatives investment strategy and solutions.
Craig added: “When building a portfolio there will always be a trade-off. It’s about balancing the trade-off between diversification and time; the longer you are invested then the better the returns. If you are forced to stay in an investment for longer then that can be beneficial for returns.”
The pair said there had been an increase in open-ended real assets products for individual investors to get around these liquidity concerns. Unlike private-equity style products, these allowed investors to make multiple contributions and receive a regular income.
AUTHOR
Laura Dew
Recommended for you
Chief executive Maria Lykouras is set to exit JBWere as the bank confirms it is “evolving” its operations for high-net-worth clients.
Bennelong Funds Management chief executive John Burke has told Money Management that the firm is seeking to invest in boutiques in two specific asset classes as it identifies gaps in its product range.
Responsible investment performance concerns have lessened as the market hits $1.6 trillion in AUM, according to RIAA’s annual report, but greenwashing fears among asset managers are on the rise.
Research by Morningstar has found fixed income funds are bucking a general trend around managed fund fee dispersion with a smaller fee dispersion compared to equity ones.
