The case for real assets when cash is yielding low returns

For some the search for stable and consistent income in a global market where cash deposits are earning low interest rates, with no sign of any upward shifts anytime soon, may seem fruitless – but perhaps it is time to consider the case for real assets, particularly property and infrastructure.

Defined as physical assets with intrinsic value, like property and infrastructure, real assets have a strong correlation to inflation and are highly liquid while being defensive in nature, with diversification benefits and income potential.

Property assets

Bricks and mortar commercial properties earn income from contractually bound tenants, with typically long cycles between market downturns. Attributes generally include:

• Consistent yield – due to the long term, contractual leasing nature of commercial property

• Indexed to inflation – annual, fixed or market rental reviews to match market conditions

• Price stability – 75% of returns generated from yield rather than capital growth Infrastructure assets These assets facilitate essential services that are used daily, such as hospitals, airports, toll roads and electricity, and can be accessed through funds that invest in globally listed infrastructure securities.

Attributes generally include:

• Consistent yield – generally infrastructure companies generate stable cash flow, returning high and growing dividends

• Flexibility – infrastructure offers portfolio diversification, stability and yield

• Protection – infrastructure is typically characterised by long-term debt structures and debt maturities that can stretch out decades. This coupled to a tendency towards fixed interest rates that are not sensitive to fluctuations and ‘cost-plus’ contracts, provides consistency

What are the risk factors for investors?

The overall scale of risk from property and infrastructure investments sits between bonds and shares because income is more secure, but there is less capital growth potential for shares.

In a world of greater volatility and lower yields on cash deposits, the defensive characteristics of property and infrastructure, as well as their predicable and stable cash generative abilities, put these investments in a good position to deliver steady returns.

If you would like to know more about the opportunities available in global listed property, or more on infrastructure and how to enhance your portfolio performance, we invite you to get in touch with one of our financial advisers on 0800 102 100 or by emailing spicers@spicers.co.nz

The case for real assets when cash is yielding low returns

For some the search for stable and consistent income in a global market where cash deposits are earning low interest rates, with no sign of any upward shifts anytime soon, may seem fruitless – but perhaps it is time to consider the case for real assets, particularly property and infrastructure.

For some the search for stable and consistent income in a global market where cash deposits are earning low interest rates, with no sign of any upward shifts anytime soon, may seem fruitless – but perhaps it is time to consider the case for real assets, particularly property and infrastructure.

Defined as physical assets with intrinsic value, like property and infrastructure, real assets have a strong correlation to inflation and are highly liquid while being defensive in nature, with diversification benefits and income potential.

Property assets

Bricks and mortar commercial properties earn income from contractually bound tenants, with typically long cycles between market downturns. Attributes generally include:

• Consistent yield – due to the long term, contractual leasing nature of commercial property

• Indexed to inflation – annual, fixed or market rental reviews to match market conditions

• Price stability – 75% of returns generated from yield rather than capital growth Infrastructure assets These assets facilitate essential services that are used daily, such as hospitals, airports, toll roads and electricity, and can be accessed through funds that invest in globally listed infrastructure securities.

Attributes generally include:

• Consistent yield – generally infrastructure companies generate stable cash flow, returning high and growing dividends

• Flexibility – infrastructure offers portfolio diversification, stability and yield

• Protection – infrastructure is typically characterised by long-term debt structures and debt maturities that can stretch out decades. This coupled to a tendency towards fixed interest rates that are not sensitive to fluctuations and ‘cost-plus’ contracts, provides consistency

What are the risk factors for investors?

The overall scale of risk from property and infrastructure investments sits between bonds and shares because income is more secure, but there is less capital growth potential for shares.

In a world of greater volatility and lower yields on cash deposits, the defensive characteristics of property and infrastructure, as well as their predicable and stable cash generative abilities, put these investments in a good position to deliver steady returns.

If you would like to know more about the opportunities available in global listed property, or more on infrastructure and how to enhance your portfolio performance, we invite you to get in touch with one of our financial advisers on 0800 102 100 or by emailing spicers@spicers.co.nz

The case for real assets when cash is yielding low returns
Important information

The content on this website is for information only. The information is of a general nature and does not constitute financial advice or other professional advice. Before taking any action, you should always seek financial advice or other professional advice relevant to your personal circumstances. While care has been taken to supply information on this website that is accurate, no entity or person gives any warranty of reliability or accuracy, or accepts any responsibility arising in any way including from any error or omission. A disclosure statement is available from your adviser on request and free of charge.

 

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