Home/Education/Real Assets
05 of 06 · Education

Real Assets

Infrastructure, energy, commodities, farmland, timber. The inflation-hedge corner of the alts allocation.

Global infrastructure AUM (2025)$1.4T
Core infrastructure target return7–10%
Inflation correlation~0.4
Typical asset life15+ yrs
How it works

The mechanics.

1

Asset acquisition

GP acquires long-duration physical assets — toll roads, pipelines, renewable energy projects, farmland, timberland. Each has its own cash flow + risk profile.

2

Cash flow generation

Most real assets are contracted revenue (regulated utility, long-term offtake agreements). Predictable income with inflation pass-through.

3

Operations

Asset management is operational — running the pipeline, the wind farm, the toll road. Different skill set from PE financial engineering.

4

Long hold + reinvestment

Hold periods 10–25 years. Returns weighted heavily toward income; appreciation is secondary. Many vehicles are evergreen.

Vehicle types

How investors access it.

Closed-end infrastructure fund
10–15 year fund life. Classic institutional structure. Best for QPs.
Evergreen / open-ended infrastructure
Brookfield Infrastructure Income, KKR Infrastructure Conglomerate. Quarterly liquidity at NAV.
Energy transition / climate fund
Counter-cyclical to fossil energy. Newer vintages 2020+. Carlyle, Brookfield, KKR all have flagship vehicles.
Direct asset / co-investment
Specific asset purchase. Concentrated. Requires asset-specific expertise (energy, infrastructure, farmland).
Sub-strategies

What lives inside the asset class.

Core Infrastructure · ~40%

Regulated utilities, contracted toll roads, established pipelines. 7–10% return. Bond-like.

Energy Transition · ~25%

Renewables (solar, wind), grid storage, transmission. 10–14% target. Capital-intensive, long-horizon.

Traditional Energy · ~15%

Pipelines, midstream, upstream. Cyclical. Useful inflation hedge but politically contentious.

Farmland + Timber · ~10%

Real productive land. Direct inflation hedge. Slow-growth, predictable cash flows.

Commodities · ~10%

Direct commodity exposure via futures or specialized funds. Volatile but truly uncorrelated.

Risk lenses

What to watch.

  • Concentration: Single-asset risk. Most real asset funds have lumpy positions — top-5 can be 40%+ of NAV.
  • Regulatory: Utilities + pipelines + farmland are heavily regulated. Rate cases, environmental, political risk.
  • Liquidity: Even more illiquid than PE. Asset sales can take 6–24 months.
  • Currency: Many infrastructure funds have meaningful non-USD exposure. Hedge or accept it.
FAQ

Common questions.

Why include real assets if I already have RE?

Different return drivers. RE is tied to property markets + cap rates. Infrastructure is contracted cash flow. They diversify each other.

Is energy transition risky?

Less risky than people think — established technologies + government policy support + utility-grade offtake. The risk is execution, not technology.

Should farmland be in a client portfolio?

For long-horizon clients with inflation concerns, yes — 3–5% allocation. The illiquidity is the biggest constraint.

What about gold and physical commodities?

Tactical use, not strategic. Better expressed through commodity-focused HF strategies or specific funds than physical positions.

← Previous
Hedge Funds
Next →
Venture Capital
Build an allocation including Real Assets