The Sanlam Real Assets Fund marks its fifth anniversary at a time when companies are reporting record like-for-like revenue growth across multiple sectors, despite their share prices being under pressure from inflation-driven rate hikes.
This, alongside the tailwinds of long-term demographic, environmental and social change, means that valuations now make an even more compelling case for investing in mission-critical real assets.
The fund is managed by Sanlam’s Multi-Strategy Team and is led by Mike Pinggera, who has been with Sanlam for over 10 years. The fund invests in listed securities that derive their value from real assets. Mike classifies real assets as the mission-critical, backbone or background assets that form the pillars of a functioning economy. It is highly diversified, comprising 37 listed holdings spanning 69 asset types across 60 countries.
Real assets have faced a challenging period over the past 18 months, with a perfect storm of inflationary pressures and skyrocketing risk-free rates setting a difficult tone. Despite this adversity, the economic advantages of real assets are now poised to manifest and could bring a sustained period of growth for the portfolio as inflation-linked operating revenues gain momentum. The forthcoming tailwinds are expected to drive substantial positive outcomes, independent of positive or negative fluctuations in headline inflation.
Mike Pinggera comments: “While the short-term performance of listed real assets and the Sanlam Real Assets Fund has encountered challenges, it's crucial to note that the overall portfolio's constituent businesses and assets have reaped substantial benefits from the prevailing inflationary landscape, delivering robust operational performance. Inflation-linked revenues tend to come with a lag, but the uptick began some time ago and we are now over the hump and are seeing inflation linkage translate into revenue growth for the portfolio.”
High interest rates impacted secondary market demand for listed real assets far greater than in private markets as investors, income investors in particular, found value in bonds for the first time in a decade. However, real assets are by nature long-life investments and are ideally suited to benefit when the current trend reverses and rates plateau or recede. We saw early evidence of this when UK inflation print undershot expectations in July and real asset share prices reacted positively across the board.
Mike Pinggera says: “Current valuations of listed real assets represent incredible value to long-term investors. The operational performance of our companies has been strong with record levels of revenue growth, but as yet this has not translated to share prices. There are early signs of corporate activity with private equity acquisitions and continued insider buyer providing further support. Market inflection points are always quite noisy, but all evidence indicates that real assets are poised for a strong recovery when the mood music improves.”
Past performance is not a guide to future performance. Do remember that the value of an investment and the income generated from them can fall as well as rise and is not guaranteed, therefore, you may not get back the amount originally invested and potentially risk total loss of capital. A table with five years’ performance is available in the fund factsheets.
The Fund has holdings which are denominated in currencies other than sterling and may be affected by movements in exchange rates. Consequently the value of an investment may rise or fall in line with the exchange rates. The Fund may invest in derivatives for the purposes of efficient portfolio management and hedging only . There is a risk that losses could be made on derivative positions or that the counterparties could fail to complete on transactions. Part of the fund may invest in fixed income securities. The government or company issuer of a bond might not be able to repay either the interest or the original loan amount and therefore default on the debt. This would affect the credit rating of the bond and, in turn, the value of the fund. Investment in bonds and other debt instruments (including related derivatives) is subject to interest rate risk. If long-term interest rates rise, the value of your shares is likely to fall.
Deemed authorised and regulated by the Financial Conduct Authority. The nature and extent of consumer protections may differ from those for firms based in the UK. Details of the Temporary Permissions Regime, which allows EEA-based firms to operate in the UK for a limited period while seeking full authorisation, are available on the Financial Conduct Authority’s website