Real assets · Global
Real assets and real estate: what you actually own
How property, infrastructure and other tangible assets are held in private structures, and the questions to ask.
Summary
Real assets are physical or tangible assets such as property, infrastructure, energy and land, and private investors usually hold them through a fund, a company or a special-purpose vehicle rather than owning them directly.
- What you own is usually a share in a vehicle, not the asset itself.
- Value depends on location, income, costs, financing and the wider market.
- These assets can be costly to run and slow to sell.
What are real assets?
They are assets with physical or contractual substance, such as buildings, infrastructure, renewable energy projects, farmland and natural resources.
Their value comes from use or income, such as rent, tolls or energy sales, and from the underlying asset's worth. Some investors like that they can have links to inflation, but that relationship is uncertain.
What do you actually own?
Usually a share or loan note in a vehicle that owns or finances the asset.
Ownership can run through a fund, a company, or a special-purpose vehicle, sometimes with lenders ahead of the equity. Read the structure: who holds legal title, who controls decisions, and what happens if the project needs more cash.
What drives the value?
Income, operating costs, financing, location, regulation and the market for resale.
Borrowing can magnify gains and losses. Interest rates, occupancy, planning rules, energy prices or demand changes can affect results. Developments carry additional risks of delay, cost overruns and failure to obtain permits.
What are the main risks?
Risks include valuation uncertainty, illiquidity, leverage, concentration and operating or construction problems.
Properties and projects are valued by professionals' estimates, not market prices. Selling can take a long time. Costs of maintenance, insurance and compliance fall on the vehicle, and so on investors.
Frequently asked questions
Is real estate safer than shares?
Not necessarily. It has its own risks, including illiquidity, leverage and valuation uncertainty.
What is a special-purpose vehicle?
A company created to hold a single asset or project, which separates its risks from the sponsor's other activities.
What is a development project?
Building or renovating an asset. It carries risks of delay, cost increases and market change before any income begins.
Do real assets protect against inflation?
Sometimes, where income or value can rise with prices, but there is no guarantee.
This article is general information for eligible investors. It is not investment advice or an offer. Capital is at risk. See our Terms and Risk warning.
