In an age where digital assets and speculative trading have become a trend, Manulife Investment Management sees value in real assets with intrinsic worth. But why? While cryptocurrency, equities, derivatives, and other markets are having a bad year due to inflation, slowing global growth, and falling consumer demand, real asset present a source of long-term income with protection from volatility.

Additionally, real assets are rarely traded in the public markets and can be accessed through private markets, providing them with an illiquidity premium over other publicly traded assets. Most other assets derive value from speculation and are pegged to market factors, but Manulife argues that real assets derive value from factors that are concrete, enduring, and essential.

Real assets exhibit low correlations to other asset classes and can enhance the yield profile in a portfolio while reducing price volatility. Real estate, land, infrastructure, commodities, precious metals, and natural resources are some real assets with intrinsic worth. Manulife says real assets have historically escaped volatility and provide potentially attractive returns, whereas ESG considerations help minimize investment risk and help with long-term sustainability of assets.

Manulife says real estate and infrastructure investments provide stable income over the long term, with appreciation over time. A real asset like Timberland provides current income in the range of 2%-4%, with capital appreciation of 5%-6%. They also provide investors with an option to invest in positive social and environmental impacts – a key metric as global attention turns to climate change and carbon markets. Agriculture returns for permanent crops may range between 9% to 11%, while row crops may return 6% to 10%, and investment in companies and assets that combine farm production with processing and marketing may give investors returns between 10-16%.

“The recognition of the importance of considering ESG factors in investing provides an opportunity for real assets to play a fundamental role in sustainable investment for a better world. It’s clear that real assets can provide solutions for three of the world’s greatest challenges: climate change, nature loss, and rising inequality,” says Manulife.

The full insight is available here.