6 real asset investment themes investors “must not ignore”

WarehouseAsset manager Sanlam has increased its exposure to real assets over the past three years, from 10% to 25% in the Sanlam Four Multi-Strategy Fund.

Here Mike Pinggera, manager of the fund, gives six reasons supporting the move, ranging rom a lack of housing, to demand for more warehouse space due to a rise in e-commerce.

HOUSING

A limited supply and rising demand for housing, together with increasing unaffordability, have led to a rise in renting – a trend set to persist. The private rented sector is tackling this challenge by creating new purpose built rental homes.

Companies exposed to this theme include Grainger.

EDUCATION

Despite high tuition fees, higher education applicants and acceptances reached a new record in 2016. The UK ranks second in attracting international students. There is a structural under-supply of purpose-built student accommodation in the UK, and many providers are helping to meet the demand.

Companies exposed to this theme are Empiric Student Property and HICL Infrastructure.

ENERGY

The energy landscape is evolving to one where renewables are beginning to play a significant role in the generation of electricity.  In the UK, onshore wind is the most mature renewable technology and the country has a naturally high wind resource over many other geographies. The UK is also the leader in offshore wind.  

Companies exposed to this theme: Greencoat UK Wind, Renewables Infrastructure Group, John Laing Environmental Assets and Brookfield.

WATER DEMAND

It is expected that there will be increased demand for water for agricultural, industrial and domestic useage. Increases in the generation of wastewater present opportunities for treatment and recycling – an underexploited resource. Desalination facilities are another modern solution to help tackle shortages.

Companies exposed to this theme: HICL Infrastructure, 3i Infrastructure and Keppel Infrastructure.

TRANSPORT AND TRAVEL

‘Revenue passenger kilometres’ have almost doubled in size over the past dozen years. One forecast is for air travel to double again by 2030. In order to meet demand growth, airlines have increasingly employed leasing. Financing companies have been acquiring and leasing aircraft to facilitate airline fleet growth and capacity expansion. 

Companies exposed to this theme: 3i Infrastructure, Amedeo and Brookfield.

E-COMMERCE

Online purchasing has increased convenience and saved time for consumers, leading to rapid e-commerce growth globally. Retailers are faced with bigger strains on volumes and delivery expectations – driving businesses to pursue more warehouse space. Today, larger logistics facilities are being developed to provide the fundamental infrastructure to handle the continued expansion of e-commerce.

A company with exposure to this theme: Tritax Big Box.

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