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

Portfolio Manager, Global Infrastructure

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.

What the energy transition means for infrastructure investing

January 2023 | 18 mins

The energy transition is providing numerous infrastructure opportunities as the world moves from hydrocarbons to renewable energy. With that said, challenges do exist, which points to the fact that renewables and conventional energy will need to work hand-in-hand on the road to Net Zero.

Closed-end fund commentary 4Q 2022

January 2023 | 3 mins

Closed-end funds tallied negative total returns during a challenging 2022 as the rising interest rate environment put pressure on most major asset groups.

Defending against sustained inflation with real assets

Defending against sustained inflation with real assets

January 2023 | 6 mins

We believe markets have transitioned to a new regime of slow growth and elevated inflationary risks. It’s an environment we believe warrants diversification and inflation mitigation. And it’s precisely the role that we feel real assets can fulfill. Watch why we think we are in a period of secular stagflation and what role real assets can play.

Institutional Investor: How the end of rate hikes could set the stage for preferred securities

January 2023 | 1 min

Preferreds have delivered double-digit returns in six out of seven years following a negative total return, according to Cohen & Steers.

Why we see favorable entry points emerging for REITs

January 2023 | 18 mins

Listed REITs have likely priced in a recession; Our analysis points to a recovery next.

What we believe investors should know about NTR redemptions

What we believe investors should know about Non-Traded REIT redemptions

December 2022 | 6 mins

Recent redemption limits placed on some notable Non-Traded REITs (NTRs) are generating headlines, but we believe there are several points investors may be missing. We do not think this reflects broad economic or systemic risk. Rather, this demonstrates how, as expected, listed real estate typically leads the private market in both selloffs and recoveries. Read why we believe recent news that NTRs limited redemptions underscores the opportunity we see in listed real estate.

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