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Bill Kelly delves into the evolving landscape in real assets, which includes infrastructure and real estate
Key Takeaways
- Real assets, such as infrastructure and real estate, offer diverse investment opportunities, and can be good substitutes for fixed income in a portfolio.
- Bill Kelly sees investment opportunities stemming from the lack of infrastructure in emerging markets - supported by a rising middle class and growing populations - as well as the crumbling infrastructure in the US.
- In real estate, strategic investors may find growth opportunities in the current disruptions in property usage in urban areas, driven by shifting work patterns and demographic trends.
Transcript
I'm Bill Kelly, the CEO of the CAIA Association. We're a global credentialing body focused on better outcomes for the end investor. We have about 14,000 members in over 100 different countries, and we've been at this about 21 years. And I think our very best days for the investor, for our mission are ahead of us.
Infrastructure is a tremendous need in opportunity globally. I've been very fortunate in my day job to travel around the world, spend some time in emerging markets. And if you look at both the lack of infrastructure in those markets but the emerging middle class, the opportunity is enormous. So, I think the future of the population is in many of these emerging markets, and they need airports, toll roads, basic infrastructure. Infrastructure here in the US is crumbling to a very large degree as well.
The concept of having a public and a private partnership to support this initiative can be a very good substitute for fixed income or an additive value within that 40 bucket if we're back to the 6040 vernacular. So I think the opportunities here and the needs can be tremendous. Again, it comes back to underwriting and finding the right partner.
I believe that the amount of capital needed to support this space is very, very small relative to what we're going to have to put into this space going forward. So I think the astute investor could probably find very good entry points in the period ahead.
So real estate, and I think when we talk about real estate, the emphasis is on the commercial real estate aspects. It certainly has been in the news. I think some of the near-term risks about COVID back to work, some of these big cities, and what we've seen in downtown San Fran is an example are real. But when I think about searching for opportunities, searching for an entry point, searching for alpha, when do you typically find that? You find it in periods of mass disruption.
I think we're going to see a lot of conversion of office space to maybe more residential housing. I look at this next generation of kids coming up, and I've got five myself, and four of them are in the workspace and living throughout the US, and they like to live in these urban settings. And I think that a lot of these major cities are maybe ripe for some form of transition.
Logistics and infrastructure in the on shoring of supply chains is going to bring a whole new set of opportunities as well. So again, for the thoughtful investor, I think if you can pick through some of these headlines, which are certainly scary and real, I think you will be able to find some opportunity in the real estate space.
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