Real assets are tangible assets with an intrinsic value due to its utility. Its value is derived by virtue of what it represents. The current very high demand for real assets is driven by the high volatility in the financial markets and the concern about high inflation rates. Regardless of short-term fluctuations and specific characteristics of different real assets, long-term trends favour investments in this area.
There are numerous possibilities for the investor to invest in real assets. Firstly as a direct investment in the preferred asset(s), secondly through an indirect investment scheme such as open-ended or closed-ended funds, stock in raw material companies, real estate equities (REITs) or ETFs to mention just a few.
The increasing importance of cities as places to live and work will contribute to the fact that approximately 60% of the world’s population will be living in cities by 2030. This favour increasing demand for real estate and efficient infrastructure globally. Specific areas of focus will be: office property, retail property, multi-family residential property and industrial property.
Sample project: CONNECTING THE WORLD – DATA CENTRES ON ICELAND
Infrastructure & Natural resources
Long-term trend, such as the growing global population, increasing urbanisation and growing economic importance of emerging markets, favour investments in real assets such as infrastructure. Recent estimates indicate that this need may total as much as $55 trillion through 2030 in the infrastructure asset class alone.
Forestry & Timberland
Demographic trends suggest that a significant amount of growth in the demand for forest products in the coming years will occur globally.
As a result of demographic trends, global demand for forest products for building materials, bio-energy and paper products will increasingly come from emerging markets.
Sample project: BALTIC FORESTLAND INVESTMENTS
There are three main drivers of demand: the growing world population; rising incomes in emerging and frontier markets and the increasing use of agricultural products for biofuels.
Sample project: AGRICULTURAL INVESTMENT OPPORTUNITIES IN AFRICA
Today, the world is flush with capital: debt and equity markets are extremely liquid, credit spreads are at all-time lows, and equity market valuations are higher than pre-crisis levels. Over the last three years, private equity firms have raised new funds in excess of US$280Bn globally; an amount of capital never raised before in any three-year period in the three- decade history of private equity. Disruptive technologies will represent an important opportunity for investment in the coming years, as these start-ups evolve beyond their embryonic stage and require growth capital to develop.
Venture capital & Start-ups
With an increasingly globalized Internet and the cost of starting new companies at historically low levels, new business formation remains impatient. The sharp increase in VC-backed IPOs will improve investment returns. Together, these factors bode well for venture capital activity in the coming quarters. Technology companies leveraging the massive adoption of smartphones and mobile applications as well as companies deploying SaaS models or focused on major business challenges such as cyber security should continue to be prime targets for VC funding. Healthcare, IT and life sciences will also continue to attract funding.
Sample project: HELPING START-UPS GO GLOBAL
Innovation & New technologies
It is hard to deny that the world is driven by technology. And while computers, cell phones, and the Internet have become commonplace, there are plenty of other sectors that are just on the cusp of breaking out and becoming extremely important industries. With the rise of Silicon Valley and the rapid growth of the tech industry, even the most conservative investors are paying close attention to the market developments. Last year, the technology sector had a level of deal activity “not seen since the dot com era”, according to PwC.
Sample project: THE GREEN BATTERY – SAFER AND MORE EFFICIENT STORAGE
RENEWABLE ENERGY & CLEANTECH
Solar and wind are gradually transforming the way we produce and consume energy, driving the on-going global energy transition. Although some better-established sources of alternative energy – hydro, wind, biomass and waste, not to mention solar photovoltaic – are supported extensively, niche renewable energy sources such as geothermal and concentrated solar power are also on the rise, natural conditions permitting. Other upcoming alternative sources include the prospect of harnessing sea power. Numerous new ocean power technologies are on the verge of commercial development.
EMERGING & FRONTIER MARKETS
By 2025, annual consumption in emerging markets will reach $30 trillion—the biggest growth opportunity in the history of capitalism. This will account for nearly half of the global total. Approximately 440 emerging-market cities are poised to deliver close to half of global GDP growth.
Sample project: A FRONTIER MARKET INVESTMENT OUTLOOK