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“ With respect to industrial real estate,
“ If you’re a private equity investor,
you likely have direct representation on the (company) board. From there, you can help enact operational efficiencies, drive positive change, and gain greater access to information because you are part of the company as a strategic investor. ”
Robert Lauzon
Investing with the right real asset manager
For individual investors and their advisors, gaining exposure to the most compelling real estate and infrastructure opportunities can be a challenge. Investment minimums can be high even for a wealthy client, and the initial lock-up period can be a potential negative for many investors. Investing in real assets, especially through private equity opportunities, is often best done through a specialized investment manager.
Selecting the right manager is key, says Orrico, and critical attributes an investor or advisor should look for include a firm’s track record, ability to leverage economies of scale, an alignment of interest between investors and the firm’s principals, and specific areas of expertise. It is these attributes that Orrico believes drives Middlefield Group’s position as a standout manager in the real assets sector.
“We have a long history in the real estate and infrastructure area. When Middlefield was founded over 40 years ago, we were focused on real estate and, along with infrastructure, that continues to be our core competency.”
e’ve been focused for several years on holdings whose tenants are logistics and distribution types of businesses
that provide the infrastructure that facilitates the demands from growing e-commerce activity. ”
Dean Orrico
w
The benefits of private equity investment
Another important distinction in real assets investing is in the structure of the investments themselves. Private equity investments are different in nature to strategies that focus only on publicly traded real asset investments, and can offer unique benefits to the investor.
Private equity real asset returns can be driven by significantly different factors than their publicly traded counterparts, Orrico explains. Share prices of publicly traded securities can be impacted, positively or negatively, by quantitative or algorithmic trading, short-term shareholder concerns, short-term reactions to geopolitical events and/or compliance issues. Companies in the private equity space, on the other hand, typically have greater flexibility and are more focused on long-term growth, he says.
“Historically, private real assets, whether real estate, infrastructure or other types of investment, have actually shown an ability to generate very competitive total returns compared to
publicly traded securities,” Orrico notes. “Even on a forward-looking basis, there was a recent institutional investor survey done by BlackRock that reported the expectation is for private equity and infrastructure to generate better returns than both traditional equities and fixed income over the next 10 years.”
The addition of private real assets exposure to a portfolio can also reduce its overall volatility, Lauzon adds. Private equity and real assets both have low historical correlations to traditional equities and fixed income. Furthermore, exposure to a private equity fund means exposure to a manager who likely has a more direct ability to effect positive change and increase investor value in a given company.
“If you’re a private equity investor, you likely have direct representation on the board,” says Lauzon. “From there, you can help enact operational efficiencies, drive positive change, and
gain greater access to information because you are part of the company as a strategic investor.”
Institutional investors expect private equity, infrastructure to be top performers over the next 10 years
15% 12% 9% 6% 3% 0
A good example of the firm utilizing its industry expertise and scale to benefit investors is the recent launch of the Middlefield Global Real Asset Fund, a strategy that leverages a newly initiated partnership with The Blackstone Group, an alternative investment leader. The Fund is an actively managed solution that combines investment in both publicly traded real asset securities and private limited partnership investments, for truly diversified exposure to the broad real assets sector.
“I recently came out of a meeting with a client. They told me they want income and low volatility, and they don’t want the whipsaw effects they’ve been seeing, when the Dow Jones Industrial Average goes down 400 points because of something on Twitter,” says Lauzon. “Our clients want exposure to good-quality companies with low volatility and income generation. That’s what we’ve been seeing in the investment market, and is the crux of the solutions we provide.”
Fixed income Equities
Private Markets
Canadian government bonds
Canadian corporate bonds
Canadian large cap equities
Global ex-Canada large cap equities
Global infrastructure equities
Global
private equities
Source: Blackrock Investment Institute. September 2019.
Real Assets Opportunities: Elder and Health Care
One critical trend that Robert Lauzon of the Middlefield Group is watching
closely is the aging population in developed economies. He expects that increases in health care spending will have significant impacts on both real estate and infrastructure. In particular, he is closely observing Europe’s demographics, in which it is expected that retirees will soon outnumber the working population.
“These demographics are driving some very compelling investment ideas, whether in real estate because of the need for nursing homes, or the need for upgraded public health care infrastructure.”
For more information about Middlefield Global Real Asset Fund or Middlefield Group, visit www.middlefield.com.
Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. You will usually pay brokerage fees to your dealer if you purchase or sell units of investment funds on the Toronto Stock Exchange or other alternative Canadian trading system (an “Exchange”). If the units are purchased or sold on an Exchange, investors may pay more than the current net asset value when buying and may receive less than the current net asset value when selling them. There are ongoing fees and expenses associated with owning units of an investment fund. An investment fund must prepare disclosure documents that contain key information about the fund. You can find more detailed information about the fund in these documents. Investment funds are not guaranteed, their values change frequently and past performance may not be repeated.