Franklin Templeton Investments, in a new report addressed to insurance companies, makes a case for real estate and infrastructure as a means of broadening their asset mix in preparation for an eventual rise in interest rates.
"We believe the addition of real asset securities to a portfolio with substantial allocations to fixed income or US equities can provide a number of important benefits, including the potential for improved longer-term performance, enhanced portfolio diversification and attractive dividend yields," the report states.
The report by Mark Whitford, senior insurance investment strategist, Franklin Templeton Institutional, Greg Wilkinson and Benjamin Lathrop said: "Recent declines in the traditionally strong performance of listed real assets may mark attractive entry points for investors seeking to include or increase their exposures, particularly in light of what we see as generally compelling fundamentals for real assets in many global markets."
The report compares US real estate investment trusts, global real estate securities and global listed infrastructure with US stocks and bonds.
The report concludes that a steady allocation to real assets "should prove advantageous during periods of rate uncertainty."