New research among independent financial advisers and wealth managers, commissioned by TIME Investments, shows that over a third (36%) of advised clients are investing in real assets.
Below, we look at what real assets are and why investors are increasingly looking towards them.
What are real assets?
Real assets are defined as a physical or tangible asset, such as real estate, infrastructure, gold or oil that has value due to its substance and properties.
The research indicates that advisers expect diversification into real assets to continue over the next 12 months with 44% predicting an increase in investments in the asset class.
“More advisers and their clients are turning to real assets such as property and infrastructure as a significant part of their investment portfolios to help counterbalance the risk as a result of continuing economic and political volatility.”
The primary driver for this is the desire to de-risk portfolios (53%), followed by the need to reduce volatility (18%) and to provide secure income streams (15%).
When it comes to real asset investments, 64% of advisers said that clients who want to accumulate wealth should consider the asset class, followed by cautious investors (34%), those that require income drawdown (32%), and investors who are retired (26%) or are approaching retirement (23%).
For clients with exposure to real assets, advisers are recommending that 25% of the portfolio should be invested in real assets in the current economic climate.
Henny Dovland of TIME Investments comments: “More advisers and their clients are turning to real assets such as property and infrastructure as a significant part of their investment portfolios to help counterbalance the risk as a result of continuing economic and political volatility. These investments are usually lower risk and volatility, providing more secure income streams which is particularly important for those approaching or in retirement.”
Dzmitry Lipski, investment analyst, interactive investor, has noted that their clients are turning to diversification within their portfolios as an antidote to continued geopolitical instability.
Lipski says: “At a time where a number of geopolitical uncertainties ranging from the US-China trade war, Brexit and even the political demonstrations in Hong Kong rocked the investment landscape, it is no surprise that our customers favoured funds that spread investment risks by investing in opportunities across the globe.”
“It will come as little surprise to even those with a modest amount of investment knowledge that Fundsmith Equity and Scottish Mortgage Trust dominate the bestseller lists for funds and investment trusts respectively.
“Both have tempted investors with their stellar returns by adopting the Warren Buffett-esque investment approach of ignoring the constant flow of macroeconomic data and the noise of the City to invest in a relatively small number of companies that can withstand the test of time.
“The plight of the once popular Woodford Equity fund is a timely reminder of why investors shouldn’t follow the crowd when it comes to selecting investments. Investors should consider their attitude to risk, investment time horizon and the current make-up of their portfolio when sizing up investment prospects.”