Three strategies for building inflation-resilient portfolios

Three strategies for building inflation-resilient portfolios

Jon Cheigh

Chief Investment Officer and Head of Global Real Estate

More by this author

1 minute read

April 2021

Share

Sign up to get our insights
Subscribe

Extraordinary policy measures may be tilting inflation risks to the upside, reinforcing the need for diversifying assets that tend to respond well to unexpected inflation.

  • Global real estate securities: Rent growth has historically outpaced inflation, while property values may benefit as higher costs for land, labor and materials raise the economic threshold for new supply.
  • Global listed infrastructure: Many infrastructure assets have pricing mechanisms that include rate escalators linking user fees to inflation, while a stronger economy has typically driven higher throughput and cash flows.
  • Real assets multi-strategy: A diversified real assets allocation has historically delivered equity-like returns with reduced volatility and strong relative performance in inflationary periods.

Long-term inflation pressures are building

Recent market attention has been acutely focused on the spike in U.S. headline inflation, which has accelerated from near zero to 2.6% over the past year. This short-term increase has been well telegraphed considering that conditions today are the mirror opposite from a year ago, with global growth in 2021 on course to hit a 50-year high. The recovery in oil prices, supply chain disruptions and a reopening economy suggest inflation could peak above 3% in the next few months before settling back to just above 2% for the remainder of the year.

Further out, however, we believe the market’s flat inflation expectations over the long run underestimate the potential impact of $30 trillion in global fiscal and monetary stimulus and more inflation-tolerant central bank policies.

ABOUT THE AUTHORS
Author Profile Picture

Jon Cheigh, Executive Vice President, Chief Investment Officer and Head of Real Estate, leads the investment department and oversees the real estate team.

Author Profile Picture

Vince Childers, CFA, Senior Vice President, is Head of Real Assets Multi-Strategy and a portfolio manager for Cohen & Steers’ real assets strategy.

Author Profile Picture

Benjamin Morton, Executive Vice President, is Head of Global Infrastructure and a senior portfolio manager for Cohen & Steers’ infrastructure portfolios, including those focused on master limited partnerships.

Author Profile Picture

Ben Ross, Senior Vice President, is Head of Commodities and a portfolio manager for Cohen & Steers’ commodities strategy.

Author Profile Picture

Jason A. Yablon, Executive Vice President, is Head of U.S. Real Estate and a senior portfolio manager for U.S. real estate securities portfolios and oversees the research process for U.S. real estate securities.

FURTHER READING

The role of real assets in today's investment landscape

The role of real assets in today’s investment landscape

July 2023 | 27 mins

The market is pricing a rapid return to low and stable inflation. Supply-side risks threaten those expectations and heighten the attractiveness of real assets.

The benefits of real assets in retirement plans

The benefits of real assets in retirement plans

July 2023 | 25 mins

With the economic regime shift now underway potentially challenging for typical target-date fund allocations, many fiduciaries are exploring diversification options for retirement plans. Listed real assets may provide an attractive solution.

Three tax-smart income alternatives

March 2023 | 20 mins

Strategies with inherent tax efficiencies may help investors diversify sources of income and potentially keep more of what they earn.