WHY COHEN & STEERS

Proprietary risk parity investment approach

Using quantitative methods, including factors like volatility and correlations, we seek a more risk-appropriate global investment universe starting point

Balanced fundamental analysis

Rigorous and disciplined investment process that features proprietary resources and focuses on top-down sub-sector analysis as well as comprehensive bottom-up security analysis and research

Experienced, dedicated team

With an average of 18 years experience, our Natural Resource Equities team includes dedicated analysts and can tap the full suite of Real Asset specialist teams at Cohen & Steers

WHY NATURAL RESOURCE EQUITIES

Real asset investment

Target companies are involved in the production of tangible assets, with barriers to supply, and can be a potential hedge against inflation

Complement to commodities

Tends to perform well at different points in the economic cycle relative to commodities, while also accessing divergent themes not available via commodities futures

Diversification benefits

Distinct drivers of risk and return, which generally lead to relatively low correlations with other real assets, stocks and bonds

The Cohen & Steers Global Natural Resource Equities Strategy invests primarily in natural resource companies that produce commodities and other real assets. In addition, these assets are linked to critical, and often depleting, commodity-related resources. The investment universe consists of approximately 200 companies that fall largely into three major sectors:

  • Agribusiness—food, machinery, and chemical companies
  • Metals & mining—precious and industrial metals stocks
  • Energy—oil and natural gas companies

Many natural resource equity portfolios are built according to market capitalization, often resulting in high weights in energy stocks. Our risk parity approach was created out of a recognized need for a smarter, more risk-appropriate global investment universe of natural resource equity companies.

Our risk parity approach uses quantitative methods designed to equally weight the three core subsectors of the asset class—energy, agribusiness and metals/mining—based on their respective contribution to overall risk. We believe this may help to reduce volatility, while providing a better balance across sectors.

We believe our Global Natural Resource Equities strategy’s risk parity based approach, combined with fundamental research allows us to capitalize on expected long-term demand growth for natural resources.

FEATURED INSIGHT

Defending against inflation with real assets

After a choppy start, expectations are for global growth to slow in 2022, but for inflation to remain elevated. In this environment of stagflationary outcomes, many investors are turning their attention to real assets.

March 2022 | 1 min

Why invest with us

Delivering value to our clients

Cohen & Steers has been at the forefront of real assets investing for more than 35 years. Our dedication, combined with our drive for excellence, has led us to build a foundation that is designed to provide sustainable outperformance relative to our peers.

PORTFOLIO MANAGEMENT

An experienced team

Tyler Rosenlicht

Head of Resource Equities

12 years of experience

+3 analysts

An allocation to natural resource equities offers the potential for attractive returns and inflation hedging, often used as a portfolio diversifier due to low historical correlations with stocks and bonds. We believe active management of natural resource equities can exploit numerous factors which can impact longer-term value.

Factors include the size and scale of operations, labor relationships, asset complexity, environmental, social and governance (“ESG”) considerations and geopolitical risks. Supply and demand economics of the underlying natural resources can also play a large role in determining which stocks are expected to perform better or worse at any given point in the cycle.

Equity investments tied to valuable real assets

Natural resource stocks represent ownership interests in companies that produce tangible assets linked to critical and often depleting commodity-related resources, with barriers to supply driven largely by capital intensity requirements.

Historically low correlations with traditional stocks and bonds

Natural resource equities’ correlation history with broad stock and bond markets indicate the potential to achieve results that are not tied to other securities or debt instruments, providing potential diversification benefits.

Increased inflation sensitivity

Similar to other real assets categories, returns for natural resource equities have shown attractive levels of sensitivity to unexpected changes in inflation.

Balanced sector allocations based on contribution to risk can create a more attractive risk-return profile

Because energy- and mining-related companies comprise a large share of the asset class, natural resources strategies with a carefully constructed sector approach can have beneficial risk-reward profiles compared with passive or capitalization-weighted approaches. Cohen & Steers’ risk-parity approach is unique among our natural resource equity peers.

Opportunities to gain value through active management

Understanding the supply and demand economics of the underlying natural resources can play a large role in determining which stocks have outperformance potential at any given time.

A prospective complement to commodities investing

Historically, natural resource equities offer access to subsectors not available in commodities futures and have shown a lead/lag relationship with the economic cycle, while commodity prices respond more directly to near-term economic activity.

APPROACH

Our investment process

We employ a proprietary risk parity approach, which uses a quantitative methodology to weight three core components—energy, metals & mining and agribusiness—according to their respective contributions to overall risk.

Risk parity universe construction
After identifying the initial universe of securities, quantitative analysis assigns risk parity weights to the three sectors to equalize their contribution to risk. Output is the framework for our bottom-up investment process.

Trend analysis
The team looks for subsectors with pricing dislocations caused by macroeconomic factors. We utilize a proprietary analysis of global supply/demand forecasts and focus on subsectors with highest potential for alpha generation.

Fundamental analysis
Companies are ranked based on quantitative screening and the team meets with management and visits assets for selected companies. We identify security relative value using valuation metrics relevant to each industry.

Portfolio construction
Securities are weighted relative to conviction level, integrating our subsector trend analysis with bottom up fundamental views. Risk management guidelines include maximum allocation to sector, subsector and security level exposure.

A portfolio managers perspective Opportunities in listed infrastructure

ESG: opportunities and challenges within real estate

November 2022 | 6 mins

Environmental, social and governance issues present demonstrable risks and opportunities for real estate. Khalid Husain, Head of ESG, and Jan Willem van Kranenburg, Senior Analyst, discuss how our integrated ESG approach at Cohen & Steers assesses and values these topics as part of our investment approach among different real estate sectors and companies.

Closed-end fund commentary 3Q 2022

October 2022 | 3 mins

Closed-end funds finished the quarter down following persistent inflation and continued talk of monetary policy tightening.

Institutional Investor: The Best Real Estate Returns Come After Recessions

October 2022 | 1 min

Head of Private Real Estate James Corl spoke with Institutional Investor for a feature story on our recent whitepaper and why an optimized real estate portfolio may require access to both listed and private markets.

With Intelligence: Cohen & Steers’ new private RE group eyes discounted retail, office

October 2022 | 1 min

Head of Private Real Estate James Corl spoke to With Intelligence about the Private Real Estate Group’s current market outlook and the opportunities that the team is looking at, including retail, surban office and housing.

Recession and the roadmap for listed and private real estate

September 2022 | 17 mins

We see an economic backdrop that will create an opportunity for strong vintage returns for both listed and private real estate. Both cyclical and secular shifts are likely to create investment opportunities, and we think allocating across both private and listed real estate will be critical.

3 reasons to consider preferreds when rates are rising

September 2022 | 10 mins

Preferred securities have characteristics that can potentially help mitigate the effects of rising interest rates.

Need to contact us?

We’d be happy to answer questions about our investment solutions or any corporate-related inquiries.