Powered by MOMENTUM MEDIA
moneymanagement logo
 
 

Real asset investors should be aware of limitations

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

24 January 2020
| By Oksana Patron |
image
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

Significant ethical issues there. If a relationship is in the process of breaking down then both parties are likely to b...

2 weeks 5 days ago

It's not licensees not putting them on, it's small businesses (that are licensed) that cannot afford to put them on. The...

3 weeks 5 days ago

So we are now underwriting criminal scams?...

6 months 3 weeks ago

After last month’s surprise hold, the Reserve Bank of Australia has announced its latest interest rate decision....

3 weeks ago

WT Financial’s Keith Cullen is eager for its Hubco initiative to see advice firms under its licence trade at multiples which are catching up to those UK and US financial ...

3 weeks 4 days ago

While the profession continues to see consolidation at the top, Adviser Ratings has compared the business models of Insignia and Entireti and how they are shaping the pro...

6 days 1 hour ago

TOP PERFORMING FUNDS

ACS FIXED INT - AUSTRALIA/GLOBAL BOND
Fund name
3y(%)pa
1
DomaCom DFS Mortgage
74.26 3 y p.a(%)
3