Elston has launched a Liquid Real Assets Index for UK investors looking for strategies that provide inflation protection.
The Elston Liquid Real Assets Index represents exposure to a diverse range of liquid instruments representing real asset classes, such as listed property securities, listed infrastructure securities, asset-backed securities, natural resources (such as energy, water, and timber-related securities), gold, and an equal-weight commodity basket including energy, agriculture, precious metals and industrial metals.
The strategy has been designed to support decision-makers considering how to adapt portfolios to inflation risk.
The index represents a range of real asset exposures that focus on providing a real income, a real value or a real difference.
Incorporating a selection of real asset exposures to a portfolio provides additional diversification for investors who are rethinking the “40” part of a traditional 60/40 equity/bond portfolio.
The index provides access to key exposures that enable a layered approach to inflation protection over different time-frames.
Introducing real assets such as commodities or infrastructure in isolation can add equity-like risk into a portfolio. By contrast, this index combines both lower-risk short-term interest-rate sensitive assets with higher-risk real assets with medium- and longer-term inflation protection characteristics. This enables a layered approach to both inflation protection and interest rate volatility.
The index is designed to have a volatility comparable to UK gilts to enable partial substitution of bond allocations, without altering a portfolio’s overall risk profile.
By accessing real asset exposures through highly liquid instruments (Exchange Traded Products), it is less likely that there are size or trading constraints when accessing these exposures.
The index values are available on Bloomberg (ticker: ELSLRA Index), Morningstar, & Financial Express) and other leading data vendors. The daily weightings scheme is available to licensees.
Henry Cobbe, Head of Research at Elston Consulting, which created the index, says: “We are seeing a lot of interest from advisers who want to incorporate real asset exposures to protect against inflation, but don’t want to exceed the risk budget for each portfolio. This broadly diversified, lower volatility approach to liquid real assets makes sense with inflation on the rise.”