Adapting to economic paradigm shifts

The strategic importance of real assets

April 18, 2024
Marc Dummer
Client Portfolio Manager
Mike Reidy
Director, Client Portfolio Manager
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Investing in real assets has an increased degree of relevance today, as they can serve as hedges against inflation and volatility, which can benefit even a well-diversified investor. It is important to be mindful of shifting paradigms driving the economy that could benefit real assets. Real assets have historically shown potential, both for helping mitigate the effects of inflation on assets and for delivering attractive returns. When diversified among the various segments within the asset class—real assets remain attractive due to numerous other non-inflationary factors.

Key takeaways

  • Long-term economic trends imply that we are now entering a new economic paradigm.

  • We’ve identified four global drivers, the 4 D’s, for short. They are: deglobalization, demographics, decarbonization, and deficits.

  • Investors should look to real assets to diversify beyond the traditional 60/40 portfolio (60% stocks, 40% bonds).

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Risk considerations
Investing involves risk, including possible loss of principal. Past performance does not guarantee future return. Real assets include but not limited to precious metals, commodities, real estate, land, equipment, infrastructure, and natural resources. Each real asset is subject to its own unique investment risk and should be independently evaluated before investing. As an asset class, real assets are less developed, more illiquid, and less transparent compared to traditional asset classes. Asset allocation and diversification do not ensure a profit or protect against a loss. Any risk management process discussed includes an effort to monitor and manage risk which should not be confused with and does not imply low risk or the ability to control certain risk factors. Inflation and other economic cycles and conditions are difficult to predict and there Is no guarantee that any inflation mitigation/protection strategy will be successful.

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MM13940 | 04/2024 | 3447104-042025
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