Real Assets Adviser

January 1, 2016: Vol. 3, Number 1

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From the Current Issue

The Language of Finance: Maribeth Rahe does not get tongue-tied about Fort Washington

Maribeth Rahe had dreams of a multi-lingual future where her French, German and Spanish language skills would land her a job working in the government with the CIA, State Department or United Nations.

So she pursued degrees in romance languages and literature, studying for a Ph.D. from Ohio State University. Her plans changed, though, while spending a semester abroad and later a summer in Madrid, Spain, when her father called to say: “I think it’s really interesting that you’re going to be fluent in these languages. But I think you ought to get a business minor because I really don’t know what you’re going to do.”

2015 Review: It was a forgettable year for those investing in real assets

Real assets is a diversified asset class covering everything from real estate and infrastructure to commodities and precious metals. With such a big tent, it would seem logical to assume that performance would be just as diversified, with some sectors up, some down. Unfortunately, looking back at 2015, nearly all sectors have underperformed, with diversity being measured in terms of just how badly each sector underperformed. Listed real assets, in particular, have struggled.

Driverless-Car Revolution: These new vehicles will drive massive disruption, forcing real estate investors to re-examine their strategies

Real property is an enduring asset not significantly affected by fads and short-term trends, and typically it can afford to adapt gradually to technology advances. But occasionally a new technology emerges that dramatically affects real estate usage and values. History is filled with examples: Railroads paved the way for the creation of new cities, enabling the transcontinental delivery of produce; air conditioning triggered a mass migration to the South; and the Internet allows tens of millions of office workers to stay home every day rather than occupy skyscrapers in center cities. But the automobile has disrupted the use and intrinsic value of real estate more than any other invention by reshaping cities, countrysides and cultures — and this past disruption foreshadows another looming transformation in how and where we live and work. That change will be propelled by driverless vehicles. 

New Directions: 10 disruptive trends challenging wealth management firms and advisers

Wealth management is one of the most attractive sectors within financial services for at least two reasons: First, wealth management businesses tend to have greater growth prospects, lower capital requirements and a higher return on equity than most other retail banking businesses. Second, its offerings are essential to attracting and retaining profitable retail customers. For instance, mass affluent customers can typically represent 80 percent or more of the net income generated by retail banks and they often regard their relationship with a provider of wealth management services as their most important financial relationship. As a result, many diversified financial services firms are doubling down on their wealth management businesses.

Investors Have Their Reservations: Lodging REITs trading below asset value are creating merger and buyback opportunities

Word emerged Nov. 16 that Hyatt is in talks to buy hotel operator Starwood Hotels and Resorts Worldwide in a deal that could be worth $17 billion. While neither company is a REIT, the transaction is emblematic of what is happening in the sector, where hotel REITs that are trading below the value of their underlying assets are creating an opportunity for mergers, acquisitions and buybacks.

Flotilla: Scottish company announces plans to build a floating wind farm

Statoil, a Scotland-based energy company, has announced plans to build a floating wind farm, dubbing it the world’s first-ever plan of its kind. The project is called Hywind Scotland and is slated to be built in the coastal waters of Peterhead, Scotland, a busy fishing port located at the north-end of the country.

Lap of Luxury: Number of high-net-worth individuals being created in Asia is multiplying quickly

Luxury is the name of the game for many high-net-worth individuals seeking to enjoy their lives by doing whatever they choose with all that money, and high-net-worth individuals in Asia are no exception.

Julius Baer recently released its fifth annual Wealth Report: Asia, which tracks the cost of luxury goods and services, along with wealth creation, in 11 Asian cities — Bangkok, Hong Kong, Jakarta, Kuala Lumpur, Manila, Mumbai, Seoul, Shanghai, Singapore, Taipei and Tokyo. According to the report, the pool of investable assets held by high-net-worth individuals in Asia could reach $14.5 trillion by 2020, amounting to growth of 160 percent in the next five years. 

Balancing Retirement Investing: Steady income is not enough; retirement investors need stock price growth, too, to build their assets

Retirement portfolios demand more than other portfolios. Investors in or near retirement need solid total returns, both to build their financial security and to help them leave a legacy. Of course, that is also true of investors who have a long time until retirement, but retirement investors need so much more, too — they need protection against inflation sapping their buying power; they need lower risk to protect against portfolio depletion; they need diversification to moderate their wealth fluctuations; and, above all, they need steady, sizeable current income to pay their living expenses.

Still Bold on Gold: World Gold Council takes exception to report saying the yellow metal

In the November 2015 edition of this magazine, reporter Benjamin Cole presented his view of gold (No Silver Lining for Gold).

We agree with Mr. Cole that gold can be quite useful in periods of systemic risk and that its prowess to hedge U.S. CPI needs to be taken with a pinch of salt. We disagree on gold being only useful in a doomsday scenario or that the opportunity cost of holding it is too high.

Miami Beach Meets Venice: Bad news might be washing ashore, but Florida developers are still swinging hammers

Alarm appears to be rising that melting glaciers and higher sea levels will turn booming Miami Beach into the new Atlantis.

Optimists argue the city will adapt, perhaps by erecting sea walls, rising roads, building arrays of water pumps to keep the water out, or even going the route of Venice, Italy — no cars or roadways, just canals and boats. Pessimists claim such notions are fantasy and that Miami Beach is headed for a washout unless a major assault on climate change is launched. 

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