A real asset is a non-financial asset that represents a real consumer right. It can be tangible or intangible . The opposite is traditional financial assets (for example, stocksor bonds ).
Its use as an alternative investment is frequent due to its de-correlation (or negative correlation ) with the evolution of the prices of traditional financial assets, in addition to providing the investment portfolio with a diversification effect , that is, in short, a lower risk. They are used by hedge funds or investment funds to invest in this asset class. As I said, these investments reduce the risk significantly without just changing the expected return on the portfolio.
The alternative investments are often much more illiquid than investments in traditional financial assets. This illiquidity is directly associated with securities that are traded infrequently and / or have a low level of trading volume, which is why it is also difficult to estimate potential profitability. It is very normal in these types of assets to find few market makers and participants that move prices through negotiations (via supply and demand ). Due to the little uncertainty about the profitability of these assets and their illiquidity, investors demand greater returns as a way to compensate for these risk factors.
Types of real assets
Real assets include real estate, land, infrastructure investments and intangible assets.
- Real estate:Historically, real estate investment (including real estate, plots, plots, commercial premises, etc.) has been the main asset class held by individual investors, especially in Spain. Although in recent years the investment in stocks and bonds is gaining weight, supplanting real estate as the most important assets of the portfolio.
- Land:Includes land and trees (for example, wood) that are used to create forest products (wood and paper). After all, the investment underlying this type of real asset takes the form of a real estate.
- Infrastructure:Includes toll roads controlled by the government, utility companies, airports, seaports and other real assets. Infrastructure investments represent assets (collection rights) against the cash flows generated by these assets, either through securities created during infrastructure privatization operations or new infrastructure projects with private financing.
- Intangible assets:Include intellectual property or copyright, patents, trademarks, etc.