Real Assets Adviser

September 1, 2015: Vol. 2, Number 9

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From the Current Issue

That New Vehicle Smell: Solid returns have spurred the growth of business development companies among yield-hungry investors.

The long, seemingly unending period of low interest rates and low returns on fixed-income investments has pushed investors to look for ways to boost their portfolios’ performance. One of the nontraditional investments getting a lot of attention because of its high yields relative to more traditional fixed-income investments are business development companies (BDC), a form of publicly registered investment company in the United States that provides financing to small and mid-sized businesses. 

The Missing Quotient: Real assets offer diversification benefits to DC plans, but they are often overlooked

Institutional investors have long recognized the merits of alternative asset classes, which not only provide diversification, but also have the potential to enhance long-term returns and hedge against the impact of inflation. However, employee-
directed defined contribution plans have been slow to adopt these strategies. We believe that participants in traditional stock-and-bond defined contribution plans would be well served to consider adding liquid real assets to their mix, taking advantage of the increasing availability of mutual funds that invest in alternative strategies.

Team Quant: Ed Keon spearheads the academic-like atmosphere at Prudential subsidiary QMA

Just when you think that Ed Keon is a devout member of the Church of Real Assets, he says something that many true believers would consider grounds for excommunication.

First, the self-described “quant” says there is nothing investment managers of his ilk more strongly believe in than the power of diversification. A portfolio rich in variety can reduce the volatility without necessarily harming expected returns, he says, and real assets is an essential tool of diversification.

Empire State of Mind: New York City is heating up, but is it all sizzle and no steak?

When executives with SL Green Realty Corp. forked out $2.6 billion for 11 Madison Ave. in Manhattan, the deal was registered as the second most expensive U.S. office building ever purchased. The REIT’s executives, already the Big Apple’s largest commercial property owners, might have chosen to celebrate with a meal from famed restaurant Eleven Madison Park, located on the building’s ground floor.

Energy Reform Bill Advances: Big data analytics could boost utility profits and cut billions per year from U.S. electric bills

Own shares in any smart-grid tech companies? If not, the time to stock up might be now.

Thanks to a rare showing of bipartisanship, the U.S. House of Representatives on July 20 rolled out a much-anticipated energy reform bill that, if eventually passed, would give tech companies serving the utility industry a huge lift. It would do so by allowing the utilities to recover via rate setting at least some of their investments in cloud-based software.

Taking It to the Streets: Infrastructure holds considerable appeal for private investors focused on yield and other objectives

Given the strategic importance of infrastructure and its impact on quality of life — as well as its high capital cost — the provision of infrastructure has traditionally been a government responsibility. However, the budget constraints confronting many national and local governments today suggest that the financing of infrastructure will increasingly move towards private investment and public-private partnerships, offering increasing opportunities for private investors. As such, infrastructure is gaining broad recognition among investors as a distinctive asset class.

The Triple Play: Looking for a substitute for fixed-income investments? Consider triple-net-lease properties

In today’s low interest rate environment, many investors have sought alternatives to traditional fixed-income investments in an attempt to generate the yields that bonds have historically provided. A variety of alternatives have been utilized by investors, including private credit funds, energy investments, pipelines, MLPs and, of course, real estate. Triple-net-lease real estate has garnered specific investor interest as investors and registered investment advisers have come to use it as a fixed-income proxy.

The Ag Investor Challenge: The race is on to grow enough food

Imagine having to harvest more food in the next 40 years than humanity has harvested during the previous 10,000 years.

Sharpen your knife and fork because that is not just an intellectual phantasm. It is the reality confronting humanity, according to Purdue University researchers. If that isn’t daunting enough on its face, consider accomplishing this herculean task amidst the onslaught of climate change, water shortages, heat waves and the diminishment of arable land.

Here, You Do It: Five reasons to outsource investment management so that you can grow your practice

Like most advisers, you may often find yourself pressed for time, with seemingly not enough hours in the day to effectively run your practice and position your business for growth. On average, advisers report spending just 60 percent of their time in client-facing activities, with the rest divided between administrative activities, investment management, and training/professional development, according to Cerulli Advisor Metrics.

Rise of the Robos: Robots moving from factory floor to fast food to handling trillions of dollars are on the frontlines of finance

Shoveling trillions of dollars about on Wall Street can be challenging work, requiring endless due diligence and lots of expensive human time and brainpower, if done the old-fashioned way.

Not only that, human beings are slow, requiring precious moments to ponder, while computers — or robots, if you prefer — think instantly, routinely and yet tirelessly, 24/7 while happily ensconced in a closet in Newark.

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