Hedges against volatility and higher inflation?
Equity market volatility has increased as a result of the Russian invasion of Ukraine, while many commodities markets have reacted sharply to the potential of supply disruptions occurring in metals, energy and grains. Many commentators see alternative assets and real estate as sources of diversification, but with inflation now likely to remain higher for longer, they could also be seen as ways of hedging inflation risks.
The housing rental market, where both demographic and cultural change is leading to increased demand, is the subject of several papers among this selection. Other papers look at the demand drivers for private markets assets, and an increasing appetite by institutions to reconsider allocating to hedge funds. The outlook for real estate assets is covered in some detail, and there is an interesting short piece on the emergence of music royalties as an alternative asset class.
In this piece from PGIM Real Estate, they focus on the demographic changes which have led to a shortage of supply in U.S. suburban residential property in the past decade. A situation which looks unlikely to be resolved soon.
MetLife IM suggests that the single-family rental sector shares many of the same characteristics that the apartment sector displayed in the late 1990s and 2000s – including growing institutional acceptance of the asset class, based on sound demographic fundamentals and technological changes.
For compliance reasons, this paper is only accessible in the United States and Canada
For 2022, BlackRock identifies three key investment themes for real assets – the necessity to adjust to a cyclical market recovery that looks unlike any seen in the past, big structural changes that are remaking this asset class, and significantly more momentum, spurred on by investor calls, for taking a more sustainable path in real assets.
For compliance reasons, this paper is only accessible in certain geographies
Aviva Investors argues that one way to hedge inflation risks is to consider the use of real assets, as a supply imbalance of liquid assets has forced prices significantly higher. Few central banks want to issue inflation-linked debt, forcing investors to pay up, or seek alternative solutions in inflation-linked private debt, long leasehold property, or subsidised renewable infrastructure.
This quarterly Strategic Insights publication from Nuveen’s Real Estate team offers in-depth analysis of the pivotal macroeconomic factors driving real estate markets, then drills down to offer insights for the key investment sectors.
Updated analysis from the real estate team at MetLife Investment Management outlines relative value opportunities, price forecasts, and reflections for investors who think inflation is more likely to be structural than transitory.
State Street investigates the demand drivers of increasing exposure to private markets, with many participants expecting to increase allocations over the next few years. Comprehensive survey data from both asset owners and managers is reflected in this paper.
Man Group offers its opinions on a range of hedge fund strategies for Q1 2022, believing that opportunities to add alpha exist in convertible and merger arbitrage and some quantitative strategies focused on China.
This short piece from CAIA highlights the emerging asset class of music royalty ownership, and why some investors believe this might be an interesting opportunity.
CEPR investigates some of the characteristics of the global private equity industry and how they interact with different interest rate environments.
Experts from 4D Infrastructure examine some of the challenges for infrastructure investment in 2022, noting that inflationary pressures are likely to present central banks with some difficult policy decisions, which may adversely impact the sector in the short term, despite longer term fundamentals remaining positive.
This report presents the results from survey data collected in December 2021 of more than 200 U.S. asset allocators. Key findings suggest half of allocators are likely to increase allocations to hedge funds, with family offices and endowments seen as being most receptive to the asset class.