Real assets are physical things that have some tangible value and benefit to an individual or corporation

Why it Matters: Our lives depend on real assets.  The are important to how live, work, commute and are vital to vibrant economy. BlackRock alone manages $60 billion in real asset investments for their institutional clients.  

The big picture: Real assets have existed for a long time, some consider real estate to be the original asset class long before stocks and bonds, and will continue to exist into the future.

The low down: Real assets come in four core flavors.

Real Estate comes in many shapes and sizes but generally consist of residential (single family homes) and commercial (apartments, office buildings)

Infrastructure assets are the basic physical things businesses, communities and nations need to function.  In the investing world, these things are bucketed into four types of assets (categories).

• Transportation, which include toll roads, airports, seaports and railways
  

• Utilities, which include electricity transmission, gas distribution, water distribution and wastewater collection
  

• Communications, which include broadcast towers, wireless towers, satellite networks, and fiber/wireline networks
  

• Renewable Power, which include hydroelectric power, wind, solar and geothermal
  

Farmland is exactly what it sounds like.  The land is leveraged to support the growth of row crop, permanent crop or livestock.  

• Row crop, such as corn, are planted and harvested annually.  
  

• Permanent crop, such as wine grapes, are perennial trees, vines and shrubs which are grown and harvested over a long period of time
  

• Livestock, such as cattle, leverage the land to support food production
  

Timberland is the harvesting of wood to support the manufacturing of various items.  

• Pulpwood, which includes paper and packaging materials
  

• Softwood, which are typically used for building materials
  

• Commodity Hardwood, which are typically used for building materials
  

• Precious Hardwood, which are typically used for furniture and remodeling
  
  
  

By the numbers:

Real Estate returns generally range from 7%-20%+.  The returns vary by real estate investment strategy

Infrastructure, like Real Estate, returns generally range from 3%-13%+.  The Infrastructure returns varies based on infrastructure investment strategy (align very closely to real estate).

Farmland returns generally hover around 5%-8%.  The rolling 12-month return as Q1 2023 8.88% according to NCREIF Farmland Index.

Timberland returns generally hover around 9%-12%.  The rolling 12-month return as of Q1 2023 was 11.31% according to the NCREIF Timberland Index.

Key Considerations: Returns, while important are not the only things to consider when investing in real assets.  An investor must take into account how the asset performs in an inflationary period, correlated it is to other assets within your portfolio, risky the strategy is and much more.  

The bottom line: real assets are important to consider when building a diverse investment portfolio.  They can provide protection against inflation, income and growth of capital.  

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