When people discuss alternative investments, they usually think of private equity, real estate, hedge funds and natural resources as the primary asset classes. But today we’ll look at an emerging alternative investment class—infrastructure.
The Financial Times defines infrastructure as “a basic physical structure needed for the effective operation of an economy. This can be for transport, such as roads or bridges, energy generation and delivery, water and waste management and communications to name a few.
“The funding of such projects provides investors with the asset and receipt of any income generated. The building and maintenance of a toll road is a classic example of an infrastructure investment. The investor can partial fund the project with, for example, a government and once finished will enjoy the asset and any income generated for a lease period. Infrastructure investments are similar to fixed interest securities in terms of return characteristics.”
For several years now, real estate has been one of the top-performing alternative asset classes thanks to historically low interest rates. And despite rates rising some this year, our belief, and the general industry consensus, is that real estate investments will remain a good option as long as rates don’t rise too far, too fast (which we don’t expect as of this writing).
A recent Reuters article quoted Prudential Global Investment Management (PGIM) as saying:
The outlook for real estate remains very strong, though investors will need to search to find attractive income streams and sources of growth that can deliver target returns, said the investment management arm of Prudential Financial Inc.
At the beginning of this year, there was hope that the natural resources market—particularly oil, would rebound. Oil was sitting around $54 per barrel in December, up from a low of $27 per barrel in January of 2016, and appeared poised for a rebound. But that rebound has yet to materialize.
In fact, the price of West Texas Intermediate Crude has experienced a rollercoaster ride this year, with a marked decline over the past month, down to $42 per barrel near the end of June.
A recent article on CNN Money noted this trend as well:
The interest in—and the need for—alternative investments such as opportunities in real estate, private equity, hedge funds and natural resources, continues to grow at a steady pace. And given the current state of the overvalued equity markets and an unsteady bond market, there’s good reason for the uptick in interest.
A recent research study conducted by data analyst firm Preqin, says, “The alternative assets industry is bigger than ever, with more than $7.7 trillion in hedge fund and private capital assets managed globally, having grown by $300 billion during 2016.”
The study also evaluated how institutional investors are allocating funds to alternative investments, and it serves as a good indicator of how alternatives are performing overall.
We’ve been saying for a while that in the foreseeable future it will become harder to realize good returns on traditional investments (stocks and bonds) due to an overvalued stock market and rising interest rates that negatively affect the bond market.
It looks like others in the industry are finally catching up to our thinking, as illustrated by a recent Reuters article that featured comments from prominent investment fund managers.
Top investment fund managers at the Milken Institute Global Conference this week said they had little choice but to focus on unusual and complicated corners of the financial markets as stock markets have risen and interest rates remain low.
Gray divorce, or divorce among couples aged 50+, is on the rise nationally, and according to the Pew Research Center it has doubled over the past 25 years.
In addition to the wide range of emotions that accompany any divorce, a gray divorce can lead to particularly significant financial ramifications since the couple is closer to retirement age and may not have as much time to rebuild or boost their individual wealth.
As you develop and modify your investing strategies over time, one important factor you need to consider is liquidity. Investopedia defines liquidity as “the term used to describe how easy it is to convert assets into cash.”
Cash is your most liquid asset because it can always be used easily and immediately. And cash is what everything else is compared to in terms of liquidity.
Over the course of your life, your priorities may change, and you may need quick access to cash from your investment portfolio. While you may be considered wealthy in terms of the total value of assets you own, if you are unable to quickly convert some of those assets into cash during times of need, it could put you in a tight spot.
We’ve discussed the financial literacy gender gap in this blog before, but a new survey by Fidelity Investments shows just how bad financial literacy has become among all Americans, no matter their gender.
In a recent report, MarketWatch outlined some questions and results from the survey, and we’ll examine a few of them in this blog and provide our input.
Q: Roughly how much do investment professionals estimate people should save by the time they retire?
According to the Internal Revenue Service (IRS), nearly 80 percent of people who file taxes receive a refund of some amount.
It’s a great feeling to get an influx of cash, but before you go and spend it all in one place, consider this an opportunity to grow your savings or to invest. It may not seem like a fun option in the present moment, but your future self will thank you.
Here are some ideas:
While we expect the bulls to run in the equity markets during the short-term, we still see a potential bear market and/or recession on the horizon – i.e. 2-3 years from now.
So now is the time to prepare your portfolio by mixing in opportunities from alternative asset classes that don’t correlate directly with the stock and bond markets. That way, whether the bears return or not, your portfolio can be protected from a devastating loss.
Any time you want to add an alternative investment to your portfolio, we recommend that you consult with a wealth manager that specializes in those kinds of investments. We also recommend that you first gauge your risk tolerance, so you and your advisor can build an investment strategy that both fits your needs and resides in your risk comfort zone.