Real Assets Adviser

March 1, 2017; Vol. 4, Number 3

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The Aggregation Strategy: Rob Francais, co-founder and CEO of Aspiriant, is on a merger spree and stoking national ambitions

By his own account, Rob Francais backed into the wealth advisory business. He already had a big-time career running at full throttle as a tax partner at the Big Four accounting and consulting firm of Deloitte. The mid- to late-1990s were an extraordinary time because many of the affluent families on the Francais client list operated businesses. With the U.S. economy in a state of “incredible activity” around mergers and acquisitions, about 30 of those client businesses were sold off for a goodly fortune.

Preserving the Family Fortune: If you think accumulating a king’s ransom is difficult, try holding onto one

“Any fool can make a fortune. It takes a man of brains to hold on to it.”

— Cornelius Vanderbilt

The Internet and publications of various kinds are littered with stories about the difficulties wealthy families face in keeping their fortunes intact over time. Apparently, it is a losing battle. The oft-repeated statistics are grim — 70 percent lose their wealth by the second generation and 90 percent by the third generation. In other words, virtually everyone who manages to amass big cash will fail in his or her quest to pass it on.

Listed Infrastructure in the Multi-Asset Portfolio: Though private investors cannot play in the institutional investors’ league, they can buy a portfolio of listed securities that gives them the same benefits

Ask investors to describe the perfect investment, and they are likely to respond, “steady income, predictable cash-flows, equity-like returns without equity-like risk, low correlation to other asset classes and, maybe especially in this uncertain climate, an inflation hedge. And, oh yes, if it could increase returns while lowering risk in my portfolio, I’d like that, too.” 

Parking Assets — the Forgotten Opportunity: New technologies and financially strapped municipalities mean parking facilities and management contracts could become cash cows for savvy investors

When you think of parking, opportunity probably is not the first word that pops into your head. If you are like most people, words such as aggravation and expensive are more likely. But, in fact, parking can present many investment opportunities. The industry generates $100 billion each year, but it often flies under the radar for investors.

Parking’s Technology Revolution: A wide array of new parking equipment has made parking more manageable and profitable for owners

In recent years the parking industry has been transformed by the introduction of many new technologies that improve customer service and make parking assets more manageable and profitable. The industry is also in the midst of a wave of groundbreaking new technologies designed to integrate parking assets into “smart cities,” self-driving vehicles, and other innovations that will change the way we live. 

The Chilean DC System: The Latin American country’s pension funds are moving into real assets

In 1981 José Piñera created Chile’s defined contribution scheme as social security minister when Chile was under the military dictatorship of Augusto Pinochet. The system required employees to set aside 10 percent of their income, and by doing this it provided a huge boost for savings, investment, employment and growth. In fact, the World Bank has held out Chile’s defined contribution system as the platinum standard. It was so well respected that 30 other countries in Latin America copied the Chilean retirement model. Investments drove Chile’s nascent capital markets to the extent that pension funds, known as AFPs, now exceed $176 billion, or around 70 percent of GDP.

Buying and Selling — Quickly: The need for liquidity in the $85 billion nonlisted REIT sector

The world of real estate dramatically changed eight years ago. Banks cut off funding for most new residential and commercial mortgages following the economic debacle of 2008, creating a vacuum that was quickly filled by alternative lenders. New rules made private real estate deals accessible to the general public, with mixed results. An average investor can buy securities that were once available only to the big boys — the large institutional and wealthy individual investors. That’s great for issuers but creates problems for buyers who have not had an easy way to sell their securities once purchased. The need for liquidity has been growing as investors have been locked in for three to five years since the start of the recovery. The need for liquidity is most needed in longer term products, specifically the nonlisted REIT.

Evaluating the Robos: Not all robo-advisers are created equal, so investors must do their due diligence

Robo-advisers have grown in popularity and assets over the past several years, attracting money from clients of traditional wealth managers, as well as smaller investors looking to get involved in investing for perhaps the very first time. In fact, industry observers now predict that robos could manage close to $2 trillion within just the next few years as more consumers become comfortable with the idea and larger firms put their hats in the ring. While there have been some robo-advisers that have grown faster than others to this point, one thing that is almost certain is the constant need for evolution in order for firms to separate themselves from the rest of the pack. 

How to Invest in Gold

For thousands of years gold has played a role in the monetary system. King Croesus of Lydia (now part of Turkey) produced gold coins around 550 B.C. Gold coins circulated in many countries before the introduction of paper money.

Falling Out of Favor: New report forecasts a slowdown in U.S. office sector

The U.S. office sector is poised for a moderate slowdown in 2017, due to a combination of softer tenant demand and an increase in new supply, according to CBRE Research. Firms are finding it increasingly difficult to find qualified workers, which is reflected in the low unemployment rate; the near-record number of job openings; a steady increase in the number of “quits,” an indicator of worker confidence; and the real wage growth.

Saudi Arabia: Big Move for Renewables

Saudi Arabia leaders are inviting international and domestic companies to bid on solar and wind power plants with a capacity to produce 700 megawatts of power. The bids, due in April, are part of a major renewable energy supply program that is expected to involve investments of between $30 billion and $50 billion by 2023.

The Future of the Farm Bill: The trillion-dollar omnibus law is at the core of U.S. food policy

U.S. food policy is in flux. President Trump has not said much about the topic directly, but he has taken a private meeting with executives from Bayer and Monsanto, whose pending merger would reshape the global agrochemical and seed industry. His nominee for Secretary of Agriculture, Sonny Perdue, appears to be a staunch supporter of Big Ag interests, and a Florida congressman introduced a bill in January that would effectively do away with the Environmental Protection Agency, despite its ongoing work on pesticide regulations.

The How-To of Investing: A new feature takes readers deeper

This edition marks the launch of our latest feature — an idea hatched during our 2016 Editorial Advisory Board meeting, which quickly received wider board support. I am speaking of the monthly feature that begins on page 30 and titled How to Invest in … 

We Have Been Here Before: Infrastructure fundraising in 2016 looks similar to 2015

For much of the past 10 years, infrastructure private equity fundraising has ebbed and flowed — up one year, down the next. Conventional wisdom predicted that once the industry grew, once there were enough managers and investors, fundraising would smooth out. No one knew what “enough” was, but they would know it when they saw it. Well, we might just be seeing it.

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