Real Asset Investment Strategies
We have seen that over various market cycles, the inclusion of real assets in a portfolio can be a valuable tool for investors aspiring to construct well-balanced and resilient portfolios. The size, breadth and tangible nature of the assets make real assets a foundational asset class for many investors.
Why invest in real assets?
Diversified source of returns
Real assets have typically exhibited low correlations to traditional asset classes. For example, core real estate has historically been a stable source of income that is uncorrelated to a traditional bond portfolio.1
Inflation protection potential
Real assets is one of the only inflation-adjusted asset classes. Service contracts and rent increases can help mitigate against the effects of expected and unexpected inflation.
Distribution rates
The long-term lease structures of core real assets may provide strong, predictable cash flow and stability to the return stream.
Invest in global infrastructure to hedge and help build a greener future
Infrastructure has the potential to provide inflation protection, income and resilience in uncertain times.
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Ready to invest in real assets or other alternative investments? Find the right strategy with your J.P. Morgan team today.
Investment styles across real assets
| CORE | CORE-PLUS | VALUE-ADD | OPPORTUNISTIC | |
|---|---|---|---|---|
| Description | Invests in high-quality, well-leased properties and assets in prime locations; returns driven by rental income, long-term contracts or regulations; often monopolistic market positions | Invests in assets that have income generating potential and/or contracted or regulated, but with more lease-up or contract-risk than Core | Invests in assets with significant leasing, repositioning and/or redevelopment risks; may take more market price risk as well; may require improvement or stabilization | Generally invests in non-income- producing assets in need of restructuring of capital structure as well as redevelopment; more GDP sensitivity |
| Typical holding period | 7–10+ years | 5–7+ years | 3–7 years | 3–7 years |
A full spectrum of alternative investment strategies
Frequently Asked Questions
Real assets cover a broad range of categories, including “hard assets” such as land or physical structures, infrastructure that covers the basic systems and facilities essential to an economically productive society, as well as other intangible assets with intrinsic value, such as mineral rights. Core/Core-Plus real assets include infrastructure, transport, timber and traditional real estate properties, but real estate also includes non-Core sectors such as assisted living, hotels, data storage and student housing. These sectors offer different risk and reward profiles based on their underlying assets.
While each real asset sub-category has unique attributes, as a class they offer similar benefits, risks and returns for long-term investors.
While each real asset sub-category has unique attributes, as a class they offer similar benefits, risks and returns for long-term investors.
- Diversification due to historically low correlation to other asset classes such as stocks and bonds
- Income, which may be attractive relative to borrowing rates
- Comparatively stable and predictable cash flows
- Low operating risk and predictable operating costs
- Inflation protection potential driven by rent growth and contracted or regulated revenues with embedded inflation adjustments
There is always risk involved when investing in private markets. Real estate markets are sensitive to the interest rate environment as well as evolving supply and demand dynamics across sectors. Investors should continue to be mindful of strategies in regards to their use of leverage, anticipated regulatory risks and property-specific risks. Manager selection remains critical to achieving optimal performance when investing in private markets.
