Real Assets Adviser

March 1, 2019: Vol. 6, Number 3

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From the Current Issue

Blunting volatility in real estate portfolios

As asset values become more volatile and the real estate cycle matures, investors need to re-evaluate their portfolios in order to create and protect wealth. For those investing in commercial real estate, there is an investment vehicle that can help do just that. An allocation to floating-rate commercial real estate transitional loans can enhance a commercial real estate portfolio by dampening its sensitivity to interest rates and credit spreads, while bolstering its income potential.

Class is in session: Wendy Benson, head of wealth management at MassMutual, learned early in life the power of financial information

Come back in time and travel with me to the town of Camillus, New York, an upstate community of industrious men and women who, today, we consider one of the many vertebrae that made up the backbone of America’s industrial might. These were largely blue-collar people who used hard work and determination to make their way in life. For financial services executive Wendy Benson, these were also family members and the vivid memories of her youth. While manual labor earned a solid middle-class living for millions in those pre–Information Age days, the later years of life sometimes brought financial struggles to people who could have benefitted significantly from some longer-term financial guidance — the kind of insights far less available in those times.

The view from New England: New energy infrastructure must be a priority

The saying goes “there’s no place like home for the holidays.” Unless, that is, the heating is set to frigid because the energy bill is too high, and the tree lights are flickering because of rolling blackouts. As far-fetched as this may sound, it is increasingly a real risk for New Englanders. On average, people in the New England states face some of the highest energy rates in the country, paying 29 percent more for natural gas and 44 percent more for electricity than the national average. But the problem is not a lack of natural gas supply; it’s a lack of infrastructure that reduces people’s access to affordable and clean energy supplies from nearby sources.

Auto icon aims to make mark in EVs: An invitation-only investment opportunity from Fisker Inc.

Automotive design legend Henrik Fisker is a man with a lot of secrets. He is raising money from investors — by invitation only — for a high-production electric vehicle to go head-to-head with Tesla, but he isn’t naming who those investors are, with the exception of Caterpillar. Yet, Caterpillar’s commitment is not being disclosed. Double-digit millions are being sought per investor, though there is no stated minimum investment or fundraising target. Fisker Inc. has collaborated with a “very large” automaker to reduce costs, but the partner is also a secret. The new vehicle is being kept under tight wraps. The new vehicle’s name is still to be decided, though it already is being designed under a codename, and the codename is also undisclosed. (Though, Fisker notes, it will not be a number but an actual name, because names are more emotionally appealing.)

Tax alert for FAs and RIAs: Revisions to the IRS code offers five significant benefits to CRE investors

The advantages of commercial real estate investments over other types of investments are undisputed, particularly in the current economic environment: higher yields, relatively lower risk and the opportunity to diversify within the field. In fact, so many investors have discovered the upside of CRE investment that in the past couple of decades it has moved from a fringe or alternative category to a legitimate category in the investment world.

Liquid alternative fund strategies for modern portfolios

There has been tremendous growth in the assets under management in the liquid alternatives space in recent years, growing from less than $150 billion in 2008 to over $900 billion today. Similar to hedge funds in some ways, and to mutual funds in other ways, liquid alternative funds provide both retail and high-net-worth investors the ability to diversify their portfolios beyond the world of long-only stock and bond funds.

Clean energy’s quiet revolution

The public perception of U.S. clean energy has undergone a major shift. In a recent survey, 70 percent of respondents said America should produce 100 percent of its electricity from renewable energy sources; more than half thought renewables were a good idea even if they raise energy bills.

IPA and Stanger take first step in reporting performance of nonlisted REITs

As demand for alternatives among Main Street investors continues to grow, the Institute for Portfolio Alternatives (IPA) and Robert A. Stanger & Company, Inc. have teamed up to publish performance data that allows industry professionals to compare the investment returns of nonlisted REITs with the broader traded real estate market and the general stock market. It is important to note that most investors will not earn the returns presented in the IPA/Stanger Monitor because of the effects of the sales load and the timing of individual investments. The IPA/Stanger Monitor advances reporting integrity across the industry by providing clear, transparent and measurable performance metrics to help financial professionals and their clients understand the value of nonlisted REITs.

The other nuclear power: Fusion reactors might finally be within reach, even as new legislation has added fuel to traditional fission reactors

The U.S. government has been plowing funds into nuclear fusion research since the 1950s in hopes of creating a safe, clean and inexhaustible source of domestic power. Fusion — not to be confused with nuclear fission, which creates dangerously radioactive waste — is an effort to fuse hydrogen atoms together to produce vast amounts of energy by replicating the physics that powers the sun.

A stable housing outlook for the U.S. housing sector

When examining the global housing market, U.S. real (adjusted for inflation) housing price appreciation, adjusted for inflation, remains lower than in the other countries. Global real housing prices have outpaced the United States, exceeding their pre-crisis peak. The global comparison becomes starker when evaluating housing price-to-income ratios over the past 20 years. Since 1997, the United States has lagged other western nations on price-to-income growth (see chart). In other words, housing prices have not nearly increased at the same rate as other countries.

Commodities given the dagger by Wall Street: Goldman Sachs decides to abandon one of its long-time signature businesses, joining an exodus made by other big banks

After commodities traders racked up their worst year on record in 2017, legendary Wall Street firm Goldman Sachs has decided to curtail its involvement with the asset class, a decision made by new CEO David Solomon. A report in The Wall Street Journal noted the move came after a months-long review by Solomon that showed the commodities business’s dwindling profits did not warrant the costs involved. The Journal cited sources familiar with the matter.

Filling the void: The cavalcade of debt funds from nontraditional lenders continues to grow

The number of debt funds and nontraditional lending sources has grown throughout this economic cycle. Perhaps that is a reflection of temporary market forces. Or, perhaps they have become a permanently larger part of the commercial mortgage landscape. Debt funds have a long history in the market. In the cycle leading up the global financial crisis, vehicles that financed highly leveraged tranches of mezzanine debt proliferated, with many getting wiped out by the downturn.

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