Real Assets Adviser

August 1, 2015: Vol. 2, Number 8

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From the Current Issue

Targeting OECD Nations: KKR closes $3.1 billion global infrastructure fund

Kohlberg Kravis Roberts, the New York City–based investment firm, has closed a $3.1 billion global fund aiming to make infrastructure investments in energy supply chain, water systems, roads, railways, airports and communications networks. The fund’s principal geographic targets will be projects in countries that are members of the OECD — an organization that represents 14 nations including Australia, Canada, Estonia, Germany, Mexico, Norway, Poland, Turkey and the United States, among others.

Lost in Cyberspace: The three biggest social media mistakes advisers make

If you have ever seen the movie Chef, you know how hairy things can get if you try using social media without the proper knowledge. One clip from the movie shows how Jon Favreau’s character replies to a tweet thinking it is private when, in fact, it was sent publicly to his nemesis, a food critic who shared it with thousands of his followers. And, it was his son, of all people, who had to explain what he accidentally did.

Money and Millennials: They are savvy, independent, skeptical and far more conservative than you might think

It is a rite of passage: Grow old enough and you earn the privilege to stereotype the younger generation. Oh, the kids these days. When it comes to the current crop of people in their 20s and early 30s — the 77 million young Americans referred to as the millennials because they came of age after the turn of the century — the typecasting has proved no different. We have all heard the generalities: hooked on social media, distracted, spoiled. As is often the case in these situations, hardly any of it is true.

The Plight of the Rich: A study by the Cato Institute indicates that the richest families in America do not get endlessly richer

The rich get richer.

That is an American maxim. It is true of many societies around the world. I have long said that Americans like that we have a system skewed toward the rich because we all think we are going to hit the jackpot one day — and we want those tax-code goodies and upward wealth distribution mechanisms in place for us to benefit from when our lottery numbers hit the mega-millions.

Playing Those Mind Games: Advisers should utilize financial psychology to work more effectively with clients

Very early in the career of a financial adviser, he or she is faced with a situation in which a client is clearly acting outside of the client’s best financial interests, and is either unable or unwilling to change. This could include overspending, under-saving, buying high and selling low, or not following through on financial planning advice. Often the adviser gives sound suggestions but the client will not act on them. Financial psychology can help advisers understand their clients’ beliefs and behaviors and equip advisers with tools and techniques to help.

Oil Change: Gyrating crude prices have spooked investors, and experts disagree if prices will go up or down

Not too many people enjoyed the rollercoaster ride in oil prices over the past year. The speed was too fast, the ups-and-downs dizzying, and when it was all over we all felt a little … unsettled.

So, do we climb back on for another ride?

Probably not. It appears the road ahead will flatten, although by how much is really just guesswork. Most folks in the oil or investment business will admit the $115 per barrel for Brent crude oil in June 2014 was too high, but the correction to about $45 per barrel in January was too low.

Heart and Soul and Yield: Women and millennials are especially keen about investing in ways that make a social impact

Green investing. Sustainable investing. Socially responsible investing (SRI). Environmental, social and corporate governance (ESG) investing. Impact investing.

No matter how it is described, a movement is slowly taking hold among investors. They no longer want to invest simply for returns. They want to invest to do good while realizing those returns. In the past, investors wanting to do good often simply avoided investments in companies that were involved in activities at odds with their values. Now, they are not just avoiding coal, blood diamonds and tobacco, they are looking to promote positive change by supporting investments that support their values, such as firms that use sustainable farming practices or environmentally sustainable building management practices or ethically sourced raw materials.

Green Acres: Farm leverage is on the rise, but from record lows

Until recently, high commodity prices and low interest rates helped sustain double-digit gains in farmland values, garnering the attention of farmers and investors alike. In fact, investors started paying closer attention to the agricultural asset class in the previous commodity bull market of 2006–2008, first by pouring money into agricultural commodities, then venturing into direct farmland investments.

Hard Assets: There is a crucial component of the endowment model that individual investors often overlook

Real assets, also known as hard assets, are to Yale’s and Harvard’s endowment investing model what logs are to cabins. Real assets — the umbrella term for real estate, commodities, energy, infrastructure, natural resources and master limited partnerships — are a crucial component of the endowment model of investing because of their response to economic cycles and their fundamental merits. They are not just for institutional investors; they belong in the portfolios of individual investors as well.

Infra-Red, Infra-Black: Maturing infrastructure asset class needs performance benchmarks that tell the tale

The investment characteristics of infrastructure are attracting a surge of capital to the asset class, with long-standing Australian and Canadian investors now being joined by pension funds and sovereign investors from the United States, Asia, Europe and the Middle East. As the institutional market grows, demand rises for tools to better monitor and benchmark the asset class, particularly from the perspective of risk managers and capital allocators.

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