Investors seeking to own real assets have more choice than ever but the problem of liquidity remains real, according to a range of wealth managers.

Simon Doherty, head of managed portfolio services at Quilter Cheviot, said: “We currently allocate circa 5 per cent of our multi-asset Managed Portfolio Service strategies to real and private assets. The breadth and diversity of exposures has increased in recent years, albeit the headline allocation changes have been incremental.

"The changes implemented to the structure of our MPS in 2021 have enabled access to a wider universe of investment ideas than was previously possible, while we can also be more effective in managing the liquidity challenges that these allocations can sometimes present.”

He said the use of investment trusts and ETPs has facilitated greater choice, as those vehicles offer a more liquid way to access less liquid assets. 

Matthew Yeates, deputy chief investment officer at 7IM, is keen on real assets but focuses his attention on the most liquid and lowest-cost asset classes, which means listed property and some fixed income exposures rather than direct exposure to infrastructure or property assets.

This is because he feels the cost of owning infrastructure or property is quite high. 

Simon Molica is senior investment manager at Parmenion said the primary reason to own real assets was the diversification benefit, particularly diversifying against the risk of much higher inflation.

But he noted that when Russia’s invasion of Ukraine created a very rapid burst of inflation, most real assets failed to rise to the occasion - but he continues to see a role for real assets in portfolios in more normal market conditions. 

Guy Miller, head of macroeconomics at Zurich, said real assets could have a place in portfolios, but they "are not the holy grail they are sometimes made out to be".

He said: "The first thing to acknowledge is they are not always liquid so you always need to see an illiquidity premium in terms of the returns you can get. One feature of some real assets is that the prices don’t move up or down as rapidly as do equity and bond prices, that can be a good thing or a bad thing, but generally speaking lower interest rates are good for real assets.” 

Rory Maguire, managing director at Fundhouse, said he did not tend to own real assets in client portfolios due to his concerns around liquidity.

Data from Asset Allocator’s own database shows the average exposure to real assets in the portfolios we monitor has risen by about 20 basis points over the past year, from 7 per cent to 7.20 per cent.