Real Assets Adviser

June 1, 2024: Vol. 11, Number 6

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From the Current Issue

Research Roundup: June 2024

Hamilton Lane’s new report — Why Are Infrastructure Managers Being Acquired? — says that as the fundraising environment remains challenging, investment firms are looking to diversify their investor offerings and serve as a “one-stop shop” for alternative assets. Read more here.

Regulation Update: SEC cracks down on unrecorded communications

The SEC is tightening its grip on financial communication, levying millions in fines for unrecorded conversations on text messages, chat apps and other unofficial channels. This has significant implications for RIAs who now need to archive all electronic communications — both internally and externally — to stay compliant. 

Investment managers increase allocations to specialty, telecommunications and gaming REITs

During fourth quarter 2023, active REIT managers increased allocations to telecommunications, gaming and specialty, bringing all three property sectors’ asset shares close to their FTSE Nareit All Equity REITs index weights. The data is based on Nareit’s analysis of quarterly investment holdings for the 27 largest actively managed real estate investment funds focused on investing in REITs. The shares of all three property sectors were up quarter-over-quarter and year-over-year. These gains have put all three less than half a percentage point below their index weights, mitigating their historical underweighting.

Plugging into the electrification: How investors can capitalize on a powerful secular growth opportunity

The world is undergoing a significant transformation driven by the electrification of the economy. This trend has the potential to span decades and has implications for different areas of the market. At its core, the electrification theme revolves around the increasing role of electricity in various sectors. Electricity demand, which has been flat for a long time, is poised for sustainable growth over the next few decades.

Is gas the new uranium? Research may reward the enterprising natural gas investor

Five years ago, we became uranium bulls. We explained how the market had quietly slipped into a structural deficit, with reactor demand outstripping mine supply. Fuel buyers used so-called “secondary supplies” to fill the gap — notably large commercial stockpiles accumulated following the 2011 Fukishima nuclear accident. At the time, investors did not pay uranium any attention at all. The premiere Western uranium producer, Cameco, changed hands at $9 per share (20 percent below its tangible book value) and held nearly $800 million of cash on its balance sheet.

Fixing the south’s aging water infrastructure will be a struggle

Climate change is threatening America’s water infrastructure as intensifying storms deluge communities and droughts dry up freshwater supplies in regions that aren’t prepared. The severe storms that swept through the southern United States April 10-11 illustrated some of the risks. In New Orleans, rain fell much faster than the city’s pumps could remove it. A water line broke during the storm near Hattiesburg, Miss. Other communities faced power outages and advisories to boil water for safety before using it.

Benchmarking CRE portfolios: Useful no-cost resources to help support you in your quest

Whether you’re an investor, investment manager, consultant or private wealth adviser, benchmarking your real estate portfolios has become increasingly important for most of you reading this column. A number of benchmarks are available to you today, including the NCREIF Fund Index – Open End Diversified Core Equity (NFI-ODCE), used by so many of you today who are attempting to benchmark the performance of your U.S. private market real estate portfolios.

Airline industry expected to soar with record summer travel

The airline industry is gearing up for what could be a record-breaking summer travel season, if forecasts turn out to be correct. Despite challenges such as the Boeing 737 MAX 9 grounding and aircraft delivery delays, airlines are reporting strong demand and growth, particularly in international markets. For investors, this could be an opportunity to gain exposure to a sector that’s poised for takeoff.

5 Questions: Simplifying access to private investments

No longer the exclusive domain of institutional investors, private investments are increasingly playing an important role in the portfolios of individual investors. Michael Bell, CEO of Meketa Capital, explains how the traditional barriers to entry have been lowered and how RIAs and their clients can access private markets more efficiently to move beyond the limitations of the traditional 60/40 portfolio.

Tax Update: Income tax vs. estate tax when minimizing your tax burden

How can you best plan for the tax responsibilities of generational wealth? It all starts at the intersection of two tax systems: income taxes and transfer taxes (estate, gift and generation-skipping transfer taxes). Balancing the impact of these two systems is critical to the wealth planning process.

Talking Points: June 2024

Jamie Dimon, CEO of J.P. Morgan Chase: “Part of the reasons I think we’ve had this strong growth is the fiscal spending. You know, why not spend another $2 trillion, and if we did, what would happen? You’ll have more money, people invest more money, people hire more people, and you have more growth. But it’s also quite inflationary, so there are tradeoffs. So far, we’re in pretty good shape, and so far it looks like that soft landing-type of scenario, but put me on the cautious side of that one.”

Sitting on cash? What’s your next move?

Chess is a unique game in that winning is almost entirely dependent on skill and strategy. There are no dice, shuffled cards or random numbers; there is no element of chance or luck. For the best chess players in the world, the grandmasters, their key strategic strength lies in their ability to think many moves ahead across multiple lines of play.

The multitenant retail opportunity

Among the top strategies for maximizing value in real estate investment is pinpointing undervalued assets that possess the possibility of creating additional value through a variety of strategies. Multitenant retail properties might be a prime example of this investment thesis, especially for 1031 exchange investors who are looking for DST replacement properties.

The industrial evolution: Behind the growing demand for modern industrial real estate assets

Industrial real estate has historically been one of the best-performing major commercial real estate asset types and, as a result, has long been a preferred option for investors. Not all industrial real estate is created the same, however. Driven by a variety of forces, including ecommerce growth, reshoring trends, technological advancements and sustainability initiatives, today’s industrial real estate landscape is experiencing a surge in demand for “modern industrial” facilities that may help users reduce expenses, while optimizing efficiency and enhancing operational capabilities.

Up to speed with the shipping business: Q&A with maritime attorney Felisa Sanchez

Felisa Sanchez is an of counsel member in K&L Gates’ maritime and finance practice groups. She has represented both domestic and international clients in maritime transactions, financings, leasing and restructurings involving a wide variety of maritime assets. Sanchez is a co-leader of the executive committee for K&L Gates’ offshore wind industry team and a member of the firm’s Women in the Profession Committee. She is also the co-president for the Texas Chapter of WISTA USA (Women’s International Shipping & Trading Association). Institutional Investing in Infrastructure editor Kali Persall recently spoke with Sanchez about trends and developments shaping the maritime industry, as well as her career journey.

The hotel segment worthy of attention

I recently had the opportunity to take my teenage daughter on a college visit. Aside from seeing the evolution of higher education since my graduation, I got to experience firsthand the current state of the select-service hotel segment. As a real estate capital adviser and investor, I tend to look at hotels through a different lens than most travelers. From my perspective, the select-service and extended-stay segment of the hospitality business has seen substantial growth and promising financial performance, particularly since the end of the COVID-19 pandemic.

The revolution will be digitized: How AI and bitcoin are transforming our world

Artificial intelligence and bitcoin were top of mind at Paris Blockchain Week, where I had the privilege of presenting to an enthusiastic crowd. The blockchain and digital assets event, held beneath the world-famous Louvre Museum, attracted close to 10,000 people, an impressive 25 percent increase over past year, as bitcoin traded near its all-time high and AI dominated headlines.

U.S. utilities could supercharge expenditures to keep pace with data center electricity demand

Data centers are at the heart of a sudden uptick in electricity usage unlike anything seen thus far in the 21st century, and it is likely to inspire a boom in utility prices and construction. Per the International Energy Agency, the United States’ 2,700 data centers consumed more than 4 percent of the country’s total electricity use during 2022, a figure projected to grow to 6 percent over the next two years.

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