Real assets: a critical foundation for portfolios

What are real assets?

Real assets are physical assets such as property, infrastructure, or natural resources that have inherent value due to their substance and utility. As assets in a portfolio, they are often used for investment, protection against inflation, or income generation.
The real assets sector includes companies that develop, own, or operate real estate and infrastructure—such as those that lease office space to the public sector or run electric utilities.

Key takeaways

• Real assets can provide differentiated characteristics in a portfolio alongside inflation protection and downside protection.
• Interest rate moderation and sticky inflation are supportive of real asset companies, alongside strong long-term secular tailwinds.
• For investors, a focus on quality and effective capital allocation will remain essential to delivering performance.
   

What do real asset companies do?

Although some investors might include commodities and natural resources, a strict focus on real asset companies provides exposure to a distinctive sub-set of the global equity market. Real asset-owning companies are active across a range of infrastructure sub-sectors such as utilities, transportation, energy, digital and communications. Within real estate, traditional commercial sectors are complemented by specialist areas such as data centres, healthcare and industrial warehousing. These share common and attractive characteristics including long-term contractual cash flows, inflation linkage, stable and growing dividends and reduced correlation to the wider equity market. 

Why invest in real assets?

Real asset companies often operate the indispensable components of daily life and economic growth. This often comes with high barriers to entry, regulated returns and comparatively low sensitivity to market volatility and economic growth. This has enabled, for example, superior dividend growth over the past five years compared to the broad global equity market, as Covid disruption had a lower impact on cash flow returns for many infrastructure and real estate companies. 

Why invest in listed real asset companies?

The listed opportunity set provides several advantages over private market access to the underlying assets. For investors that are unable or unwilling to allocate to private fund structures, being able to invest in listed companies unlocks exposure to underlying private assets that can provide differentiated returns over the long term. The listed market has continued to grow in scale, enabling investors to maintain geographic and sector diversification without compromising on liquidity. Furthermore, even for institutional investors, the listed markets can provide advantages over private structures. Certain highly attractive sub-sectors, such as regulated electric utilities, are very rarely transacted in private markets but can be accessed readily in listed markets. As well as sector access, public markets can often also provide attractive valuation entry points in situations when, for various reasons, listed companies may trade at an implied valuation that is below where privately held equivalent assets are transacting. 

Real assets have weathered the storm

The last five years have been turbulent for investors in the infrastructure and real estate markets. In the years leading up to and during the pandemic, low interest rates and the maturing of sectors exposed to the energy transition led to growth in the number of real estate and infrastructure companies entering public markets and an increase in allocations from investors. The attraction of relatively high income and portfolio diversification led to this first wave of interest from a wide range of allocators. 

However, the invasion of Ukraine, the associated energy shock, high inflation and subsequent rapid rises in interest rates had a sharp and negative impact on infrastructure and real estate markets. Investors struggled to confidently price duration-sensitive assets, and many reallocated back into more traditional fixed income in order to capture recovering yields. 

A second wave for real assets?

Whilst uncertainty in 2025 has risen with tariffs and geopolitical turbulence, there are strong signals to suggest that we are now on the edge of a renaissance. A second wave for the real assets sector is building as a number of important conditions begin to align. 

Interest rate moderation combined with sticky inflation creates a ‘Goldilocks’ scenario for infrastructure and real estate companies. As interest rates flatten or come down, asset valuations increase, and financing expenses fall. If inflation remains elevated, many real asset companies will benefit as they tend to have contracts with payments adjusted based on inflation. While a global slowdown or stagflationary environment will be an overall negative, the relative economic insensitivity of many infrastructure and real estate business models can shine in such uncertain conditions. 

What’s driving infrastructure companies?

A wide-ranging policy focus on energy security, grid resilience, infrastructure renewal, and stimulation of long-term economic growth is driving a change in capital investment across markets over the coming decade. Regulated grid operators and other businesses involved in the generation, transmission, and distribution of electricity and gas are set to achieve increasing returns as a result. In addition, as the world continues to digitise, the demand for the physical assets that support data computation and transmission continues to grow. Wireless communication, data centres, and other assets will continue to benefit from high growth, supported by long-term contractual revenue streams. 

What’s driving real estate companies?

Within real estate, the divergence in performance of different sub-sectors continues to create opportunities for investors. Traditional sectors such as office and retail continue to face headwinds, but with some pockets of opportunity in certain local markets. Logistics and cold storage warehouse assets face more uncertainty due to the ongoing tariff wars, but the scarcity of new supply in some markets could act as a tailwind. Healthcare and data centres remain buoyant, with clear long-term growth drivers. Valuations will be a key consideration for investors in accessing some of these real estate bright spots, reinforcing the importance of being able to look globally when seeking exposure to themes ranging from AI to ageing demographics. 

Real assets today

Navigating this real asset market will remain challenging. Risks lie in chasing themes and or seeking the highest possible income without considering the quality of business models. In a sector that fundamentally requires higher levels of leverage, balance sheet health and effective capital allocation are more important than ever as the era of ultra-low interest rates is behind us. Companies that can avoid over-dependence on raising fresh equity and maintain balance sheet flexibility and conservatism will be better positioned to navigate the ongoing capital market volatility, and generate long-term returns to shareholders. 

As global markets both adjust to new macro conditions and seek to manage heightened trade uncertainty, listed infrastructure and real estate companies can play a vital and hard-to-replicate role in a diversified portfolio. Contracted cash flows from ‘mission-critical’ physical assets can provide low-volatility earnings and stable, growing dividends, and can mitigate the impact of inflation. These defensive characteristics, combined with expected capital investment and earnings growth, position the sector well for the long term. 

Our approach: the Guinness Global Real Assets Fund

Against this background, a new opportunity for investors comes with the launch of the Guinness Global Real Assets Fund. With this new strategy, Guinness Global Investors aims to harness the growth potential and inflation protection of the sector with an emphasis on quality companies for which its funds are well known.

Learn more about the Guinness Global Real Assets Fund here

Risk: The Guinness Global Real Assets Fund is an equity fund. Investors should be willing and able to assume the risks of equity investing. The value of an investment and the income from it can fall as well as rise as a result of market and currency movement, and you may not get back the amount originally invested. For full information on the risks, please refer to the Prospectus, Supplement, and KID/KIID for the Fund, which will be available in English at Fund launch on our website (guinnessgi.com/literature).

The Fund will be actively managed with the MSCI World Core Infrastructure Index used as a comparator benchmark only. The Global Real Assets Fund will invest primarily in Global companies which pay dividends.

Disclaimer: This insight may provide information about Fund portfolios, including recent activity and performance and may contains facts relating to equity markets and our own interpretation. Any investment decision should take account of the subjectivity of the comments contained in this insight. This insight is provided for information only and all the information contained in it is believed to be reliable but may be inaccurate or incomplete; any opinions stated are honestly held at the time of writing but are not guaranteed. The contents of this insight should not therefore be relied upon. It should not be taken as a recommendation to make an investment in the Funds or to buy or sell individual securities, nor does it constitute an offer for sale.