It’s a newish term, ‘real assets’, but it is increasingly resonating with investors. Legg Mason explains how these assets – such as property, infrastructure and utilities – benefit a portfolio.
In the fourth white paper of a five-part series, ‘Income Solutions for Life’, the big multi-affiliate manager, says a lot of Australian investors look no further than Australian listed property trusts (AREITs) for their real-asset exposure.
But, the paper says, “By including other real assets, such as infrastructure and utilities, the economic diversification that the investor benefits from is greatly enhanced. It also alleviates the concentration risk associated with a single asset class approach.”
Legg Mason Global Asset Management, which has a big Australian presence managing about $40 billion of Australian-sourced assets”, has built a range of income investment strategies, which include real assets.
The underlying fundamentals and drivers of real assets are unique when compared with the broader services based economy, which makes up the majority of Australia’s economic growth.
“Real assets generally have a large ‘sunken’ capital base that drives cashflow. This means that future growth does not necessarily rely on further investment expenditure, the paper says.
“ In addition, returns are less likely to be swayed by the ups and downs of the business cycle, resulting in more stable dividends for income investors.
“One of the key drivers of real asset growth is population growth. Australia is projected to experience very strong growth between now and 2050. The largely monopolistic nature of infrastructure assets allows them to benefit directly from population growth, as more people use these fixed assets.”
All the papers can be accessed at: http://www.leggmason.com.au/income-solutions-for-life/