Real Assets: Future proof investing
Investing can seem like an abstract affair – to many people, stocks and shares represent little more than names on a computer screen, rising or falling at the whim of the markets.
But real assets are different. As the name suggests, they’re real, physical entities – things that you can see, touch, use and enjoy. Like real estate – not just run-of-the-mill office blocks, but major shopping centres that everyone’s heard of, such as Westfield in London. Infrastructure – think about renewable power plants that are helping the world meet its carbon emission reduction targets. And farmland, which grows the food we all eat.
Real assets not only somehow feel different from an investor’s perspective – they also act differently to stocks and bonds in an investment context. That means they can provide big benefits to a broad investment portfolio: their returns don’t tend to move in line with those of stocks and bonds, so an allocation to real assets can be a great way of reducing overall portfolio risk.
They also provide the potential for strong returns in what remains a low-yield world. And against a backdrop of rising prices, they can help protect your portfolio against the pernicious effects of inflation: real estate rental income tends to rise in line with inflation, as do infrastructure asset contracts and farmland prices.
Futureproof; create sustainable value
What’s more, by investing in real assets you can use your money to create sustainable value.
Real estate is one of the world’s biggest sources of greenhouse gas emissions, so by choosing to invest in the greenest buildings and property management companies you’re sending a powerful message that practices need to improve.
Massive investment in renewable power plants around the world is needed if we’re to meet the goals of the Paris Agreement and limit climate change, and there’s huge need for other kinds of infrastructure to improve the quality of people’s lives around the world.
And by investing in farmland, we can promote sustainable, eco-friendly practices that minimise our adverse impact on the environment as we feed the world’s growing population.
Standing out from the crowd
Kempen has been investing in real assets since 2000, and we believe two factors really set us apart.
First is our focus on sustainability.
The carbon footprints of our real estate portfolios have consistently been lower than that of the broad real estate market over time, and our assessment of companies’ ESG behaviours makes up a significant proportion of the overall score we assign them.
In our infrastructure funds we invest in companies helping contribute to five separate UN Sustainable Development Goals as we take a forward-looking approach – analysing companies’ expected contributions to sustainability in the future as well as today.
Meanwhile, in our farmland strategy, we seek to use regenerative or nature-inclusive farming techniques that contribute to several Sustainable Development Goals.
The second is the way we use data.
Our real estate team covers over 500,000 buildings owned by around 300 listed real estate funds and 60 private real estate funds. Our data infrastructure seamlessly integrates the millions of resultant data points into our process, enabling us to objectively identify mispricing opportunities across the world.
Similarly, our infrastructure team uses vast amounts of data, including micro-location wind and solar data to identify the best sites for renewables plants, and performing micro-location analysis of the climate risk, such as hurricanes and flooding, that individual infrastructure assets are exposed to.
To meet the Paris Agreement Goals for 2030, 30 gigatons of CO2 per year must be removed from the air. Farmland offers unprecedent opportunities to permantly store CO2 ¹.
1. In 2017, a study was published under the name Griscomet al called "Natural Climate Solutions" (hereinafter "the GriscomStudy"). The research was conducted under the supervision of several NGOs (including The Nature Conservancy) and over 20 research centres from renowned universities such as Ohio, Cornelland Wageningen. The group investigated how much nature can contribute to the goal of keeping the average global temperature rise below 2°
Kempen Capital Management N.V. (KCM) is licensed as a manager of various UCITS and AIFs and authorised to provide investment services and as such is subject to supervision by the Netherlands Authority for the Financial Markets. This document is for information purposes only and provides insufficient information for an investment decision. This document does not contain investment advice, no investment recommendation, no research, or an invitation to buy or sell any financial instruments, and should not be interpreted as such. The opinions expressed in this document are our opinions and views as of such date only. These may be subject to change at any given time, without prior notice.