Are Real Assets set to outperform?
The term "real assets" refers to two properties: firstly assets which have physical substance (e.g. property, farmland, infrastructure and commodities) and secondly, investments which are expected to give a "real" return with a degree of inflation-protection. In a reflationary environment, "real assets" tend to outperform financial assets, so it is no surprise to see asset allocators paying more attention to these asset classes as they become more confident of the global economic outlook.
In this month's round-up of the best strategy papers, William Blair argues that there are reasons for optimism in the emerging markets asset class, while Schroders gives a very long-term appraisal of investment returns.
Some Like It Hot: Fiscal Policy, Inflation and the Role of Real Assets (QMA, March 2017)
This paper examines makes the case for investing in real assets. It also discusses historic returns during normal and above-average periods of inflation.
Emerging Markets Outlook for 2017: Risks Remain, But There Are Reasons for Optimism (William Blair, Mar 2017)
This paper by William Blair explores the state and outlook for global emerging markets. The pros vastly outweigh the cons.
Reflation Catalysts: Unlocking Value in Real Assets (Cohen & Steers, 2017)
This paper argues that the market environment is turning strongly in favor of real assets. Following a long period of low rates and inflation, the current reversal could have important implications for the attractiveness of real assets.
Geopolitics and Investing: The Normality of the Unexpected (Pioneer Investments, March 2017)
Global geopolitical changes will be the major risk to investment in 2017. This 14-page paper by Pioneer Investments explores the relationship between geopolitics, markets and investment strategy.
Long-run asset class performance: 30yr return forecasts (2017-46) Schroders
This paper by Schroders Economics Group forecasts 30-year return for a range of asset classes. Here, the authors outline the methodology used, which is based on a series of building blocks and estimates of risk premia.
How to Strike the Right Balance in High Yield Bonds (PineBridge, March 2017)
This brief paper by PineBridge Investments examines high yield bonds, specifically how they can help investors strengthen yield curve positioning and diversify portfolio duration risk as the Fed looks to normalize rates.
Synchronized global recovery makes investors optimistic (Robeco Monthly Outlook, March 2017)
In this monthly outlook paper, Lukas Daalder of Robeco states that a synchronized recovery in the global economy is making investors more optimistic.
A framework for thinking about rising inflation: Think Function, Not Form (Wellington Management, March 2017)
In this paper, Nanette Abuhoff Jacobson, Global Investment and Multi-Asset Strategist, describes her "Think Function, Not Form" asset allocation framework.
How much should we read into shifts in long-dated yields? (BIS, 2017)
This is a speech by Hyun Song Shin of the Bank for International Settlements, to the U.S. Monetary Policy Forum on the topic of negative, long-dated yields.
Following a strong year for loans, it's back to the (floating) future - Eaton Vance, March 2017
In this Q&A, Craig Russ (Co-Director of Floating Rate Loans, Portfolio Manager) and Ralph Hinckley (Portfolio Manager) discuss their perspectives on the market, and what they see ahead for 2017.