Compelling structural and cyclical dynamics are creating attractive opportunities in real assets, particularly across the energy value chain and power generation sector.
Real assets, defined here as natural resources and infrastructure, are an essential part of the global economy. Today, we believe there is a vast opportunity to develop, own and operate tangible real assets—from commodity reserves and production assets to the physical infrastructure that is critical to transporting, storing and converting those commodities to a usable form in the real economy.
The investment opportunity is supported by several long-term macroeconomic trends that may serve as tailwinds to the asset class going forward—global population growth, urbanization and an increasingly wealthy middle class, to name a few. In recent years, investors have turned increasingly toward real assets in an effort to enhance their portfolios by targeting stable long-term returns, protection against inflation and portfolio diversification amid an uncertain global environment.
Setting the Stage: Macro Tailwinds
The global population is expected to reach 9.7 billion by 20501, with the growth concentrated largely in emerging markets such as Asia (specifically India) and Africa. This projected growth has significant implications for the real assets market. For one, surging populations increase requirements for basic infrastructure to support the movement of people and products, as well as next generation, high-tech infrastructure to deliver digital connectivity. At the same time, a rising global population increases demand for basic services, including electricity and heat, thereby driving demand for commodities like oil and gas, as well as for newly competitive renewable energy solutions.
- Source: United Nations DESA/Population Division. As of July 29, 2015.