Funds
Fonds
(Runtime: 6:00. Read the audio transcript.)
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A collapse in correlations to broad equities has made real assets more attractive from a portfolio construction perspective, says Vince Childers, senior vice-president and head of real assets multi-strategy with Cohen & Steers.
Speaking on the Soundbites podcast this week, Childers said correlations between real assets and equities have collapsed to the lowest level he’s seen in his career.
“What I’d normally expect to see is if global equities were going up very strongly, that real assets would be going up, but they would be not perfectly in sync. They’d be bouncing around and headed in the same direction,” he said. “That relationship has basically broken down. There’s almost no relationship at all.”
That has produced significant diversification benefits, Childers said, making investors increasingly interested in real assets.
Where investors once turned to the asset class primarily for inflation protection, many are now using it to diversify increasingly concentrated equity portfolios.
“And that makes sense, right, if you think about how concentrated a lot of the broad equity indices have become,” he said. “Real assets are doing things that are very different, responding to different drivers in the market and the economy.”
Recent performance illustrates the divergence. So far in 2026, real assets are up more than 14%, solidly outperforming global equities with a near-zero correlation.
“It’s been a perfect thing to have in the recipe if you’re a strategic asset allocator,” he said.
Among what he calls the “core four” real assets — real estate, resource equities, commodities and listed infrastructure — he currently favours resource equities and listed infrastructure.
“In both cases, what we have is valuations that look relatively well-behaved and growth expectations that look pretty strong,” he said.
Resource equities carry especially strong growth expectations and are his preferred way to express oil price upside. For its part, infrastructure benefits from “still pretty cheap” statistical valuations.
That leaves commodity futures and real estate underweight in his portfolio.
“But even there, those asset categories for us don’t look much worse than neutral unattractiveness,” he said.
He said there are a couple of risks to the real assets thesis that he’s watching for.
One is a sharp move toward disinflation — or worse, deflation — that undermines the inflationary forces supporting real assets.
“This is obviously not our base case,” he said. “[But] if something like that happened, that’d be a prescription for our fundamental thesis, and the secular trends in real assets that we like, to come to a sort of abrupt halt.”
The other flag would be an acceleration of AI-focused gains that leaves real assets lagging by comparison.
“It may be a world where our type of assets still do OK, but they wouldn’t be the juggernaut of assets at the frontier of the AI world,” he said.
In a way, real assets look more attractive because they haven’t participated in the euphoria and enthusiasm that has consumed much of the market and that has driven equity concentration.
“You combine that with the diversifying elements [and] the collapse in correlation, and I think we’ve got a pretty compelling value proposition for real assets as an asset class,” he said.
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This article is part of the Soundbites program, sponsored by Canada Life. The article was written without sponsor input.