The advisor’s guide to investing in real assets based on futures and equities


When investors think of “real assets,” physical gold is often the first thing that comes to mind; however, there is other ways to gain exposure to commodities that bring increased benefits to a wallet.

Investors may find benefits in equity-based “real assets”, including natural resources, global real estate and listed infrastructure. The three “real assets” asset classes can provide diversified risk exposures and, in some cases, inflation protection, according to FlexShares.

Natural resources, global real estate and listed infrastructure are all exposed to equity markets. In addition, natural resources are exposed to emerging market equities and commodities; real estate and listed infrastructure have exposure to forward interest rates, and real estate has exposure to credit, according to FlexShares.

“Real assets are a great way to augment that 60/40 portfolio in a way that helps you in times of inflation,” Christopher Huemmer, principal investment strategist for FlexShares ETFs, told Exchange: an ETF experience.

An equity-based approach to natural resources has historically significantly and persistently outperformed a futures-based approach to gaining exposure to commodities. According to FlexShares, in all cases between July 31, 2011 and December 31, 2020, the five-year projected monthly rolling returns of the Morningstar Global Upstream Natural Resources Index were higher than those of the Bloomberg Commodity Index.

“This outperformance was driven by equity market exposure, but commodity prices have always played a significant role in yield expectations,” writes FlexShares. “The modest growth environment during the period – combined with OPEC-controlled supply – which gradually eliminated the oil glut of the previous decade also played a role. We believe the continued rise in the middle class in emerging markets should support commodity demand more broadly in the coming years.”

Investors looking for increased diversification and potential inflation protection through an equity-based approach should look to FlexShares Morningstar Global Upstream Natural Resources Index Fund (GUNR).

“If you’re thinking about investing strategically over a longer time frame, stocks make more sense to me for several reasons,” Huemmer said.

GUNR invests in global companies focused on the energy, metals and agriculture sectors, while maintaining core exposure to stocks in the forestry and water resources sectors.

By allocating dedicated exposure to timber and water resources, diversification within the natural resources space is increased, providing investors with broad coverage of the upstream natural resources supply chain. The methodology underlying the GUNR prevents a single natural resource domain from dominating or distorting overall exposures and performance.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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