Real Assets Adviser

April 1, 2018: Vol. 5, Number 4

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From the Current Issue

Roundtable: What people in and around the private investment realm are saying about issues ranging from infrastructure and electric vehicles to homeownership and blockchain technology

Sam Korus, analyst, ARK Investment Management, writing in an organization white paper about the future of electric vehicles: We expect global sales of electric vehicles to reach 17 million units by 2022, while agencies like the Energy Information Agency are forecasting only 2 million to 4 million units. Given the declining cost curve of lithium-ion battery cells, juxtaposed against the rising cost of internal combustion engines, electric vehicle sales growth is accelerating rapidly. Growth could be curbed by battery supply constraints in the next two to three years, but capital spending in this space should accelerate as battery supplies rise to meet the demand.

Brand builder: When the RIA merger-mania smoke clears, Wealth Enhancement Group CEO Jeff Dekko aims to ensure his firm is one of the big winners

Jeff Dekko’s favorite breakfast cereal is Wheaties, which would be an inconsequential piece of information except that he is a former executive at General Mills, the breakfast cereal giant. More to the point, Dekko was brand manager for Wheaties and Cheerios — but Wheaties was his favorite. Oddly, it is a cereal he never eats, as is the case with most other Americans who buy Wheaties.

Renaissance of the retail investor: Individual investors are about to play a much bigger role in the investment industry

Unaccredited retail investors — individuals who earn less than $200,000 per year and have a net worth of less than $1 million, or a couple that earns less than $300,000 per year with a net worth of less than $1 million — have been significantly marginalized by the financial services industry. The reason: Financial service providers have been increasingly strangled by escalating compliance costs stemming from a seemingly never-ending stream of retail-hostile securities regulations.

The co-working evolution: Investors are taking note of the shared-office-space trend

Co-working firms, led by WeWork Cos., have grown to meet the changing demands of the modern office and labor markets. Nowhere is it more evident than in gateway cities. In New York City, WeWork alone leases more than 1 percent of the city’s office space across 44 locations, according to Green Street Advisors. While the industry’s share of total office space is still small on a relative basis, its rapid growth is forcing investors to take notice.

Impact investing for the ages: Did $60 billion ever do so much good for so many?

Five decades ago, South Korea had a per-capita GDP of $158, making it one the world’s poorest countries. That was before the United States, in the aftermath of the Korean War, pumped $60 billion into South Korea over a 30-year period and secured the nation’s physical security with a U.S. military garrison. Then there were trade and other forms of economic cooperation. Today, South Korea has a per-capita GDP of more than $27,000, as it has progressed into a post-industrial economy excelling at consumer electronics, biotechnology and robotics, among other lines of business. It has also moved from dictatorship to stable democracy.

The increasing presence of family offices in real estate: Growing portfolios are also expanding geographically

The current market environment has pushed family offices to look beyond the traditional asset classes of bonds and stocks. In the ever-present search for higher total returns with predictable cash flows, family offices have been expanding portfolio allocations toward higher-yielding alternatives and, in particular, real estate. This makes intuitive sense, as even in today’s pricey environment, cap rates are hovering above 6.0 percent, a healthy premium over the current dividend yield of 1.8 percent on the S&P 500. More than 560 family offices are either considering or currently investing in real estate, with a current or planned real estate allocation ranging from $5 million to more than $1 billion.

Where to invest if inflation picks up: What historical data tells us about how asset classes have performed in different inflation scenarios

Inflation is as violent as a mugger, as frightening as an armed robber, and as deadly as a hit man. That quote, from former President Ronald Reagan, seems almost quaint today, when the Federal Reserve (among other central banks) struggles to push the inflation rate up to 2 percent. Since 2009, inflation has been subdued globally, making it difficult to conceive of a return of the dreaded monetary hit man. Yet in recent months, some prices and key measures of inflation expectations have sprung to life again.

Investing like the Harvard and Yale endowment funds

U.S. university endowments, such as Harvard and Yale, have been leaders in diversified multi-asset-class investing for more than two decades. Through this approach to investing, and with a large exposure to alternative asset classes, they have consistently achieved attractive annual returns with moderate risk. This paper explores whether investors can benefit from applying these investment principles to their own portfolios.

How to invest in water

As an investable commodity, water remains something of an oddity. Unlike oil, wheat, gold or any number of staples, buyers and sellers cannot execute a “bet” on water through well-understood futures markets, such as the New York Mercantile Exchange. There are no global prices for water.

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