Hard assets: Real estate invesing makes a comeback
“I’m a hopeful person,” Fink said during the Cramer interview. “I believe in 10 or 20 years, humanity [will be] in a better position than it is today. With that view, I want to own hard assets today. I want to own equities. I want to be part of this economy."
Hard assets or tangible assets — physical materials such as real estate, collectibles, precious metals like gold, along with natural resources like oil, gas and food crops — are traditionally considered a safe haven during periods of economic turmoil and inflation. But Fink prefers certain types of hard assets over others.
For instance, Fink has often shied away from commercial real estate, pointing out that the risk of this asset due to pressures for remote work and work-from-home employment agreements. That doesn't mean the Blackrock CEO doesn't like commercial real estate (CRE) — he just likes specific types of CRE. For instance, rather than invest in office and retail, Fink prefers infrastructure assets.
When held in retirement savings accounts, "these are good healthy long-term investments,” he says. This asset looks even better when federal funding is allocated for long-term projects, such as current US President Donald Trump's promise to build walls or out-going Prime Minister Justin Trudeau's pledge to invest CDN$33 billion in infrastructure projects.
Fink believes there are infrastructure opportunities that have the potential to deliver “anywhere from 8% to 15% returns — with some offering even high probabilities of success.”
As Fink points out: Double-digit returns are attractive in any environment, but especially noteworthy when they’re backed by hard assets.
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Invest NowAI and robotics
Over the last few years there's been a rise in trade tensions that were exasperated by supply chain disruptions, economic pressures and a demand for updated employment contracts. According to Fink, these trade tensions create headwinds when it comes to automation. “We’re going to see an acceleration of fragmentation of the supply chains because of geopolitical issues,” he says. This will prompt new opportunities and alternative solutions — and many answers could be found in the growth and use of artificial intelligence (AI) and the advancement of robotics. "As we advance AI and robotics, there is such an enormous opportunity for nearshoring.”
Nearshoring is a term used by industry experts to describe the relocation of factories and manufacturing hubs to countries that are closer to consumers.
In fact, a survey found that a majority of U.S. business stakeholders leaders have been approached by boards of directors, employees, local, state and federal governments, industry organizations, as well as family and friends to consider increased efforts of reshoring or nearshoring. Furthermore, these numbers have been continually increasing over the last three years. These findings are courtesy of Kearney, a global management consulting firm.
And it's already started. Amazon (AMZN) and Apple (AAPL) have already deployed robots to manage inventory in warehouses and recycle phone parts. This trend could accelerate as automation technology gets more advanced and the need to bring manufacturing back home becomes more pertinent.
Fink’s optimism about these trends is palpable. However, investors need to consider that Fink and his firm drive results when the market is optimistic, since better market sentiment translates into better capital inflows for Blackrock’s funds and higher management fees for the company.
Art as a hedge against a market crash
If you’re looking to diversify your portfolio outside of real estate and AI, consider an alternative asset like fine art. Masterworks is making this inflation-hedging asset — which has historically been reserved for the ultra wealthy — accessible through their platform.
With Masterworks, you can purchase shares of iconic works of art and benefit from their diversifying ability, without needing to shell out millions of dollars at an auction.
It can also pay to keep some cash on hand. Cash reserves in your portfolio could be the difference between you holding fast through market turmoil or you having to sell your investments at a loss.
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Find Your Card NowHow to invest in real estate and AI without adding unnecessary portfolio risk
For investors who want to add real estate and automation to their investment portfolio, the key is to consider where the investment will be held and how it will be used. For instance, investors comfortable with stock-picking — analyzing a firm's financials — may want to find individual companies that specialize in these investment sectors.
For investors more comfortable with holding a diversified basket of shares in companies working within these market sectors, a better option is to find a pooled fund, such as a real estate investment trust (REIT), a mutual fund or an exchange-traded fund (ETF).
For example, Canadian investors interested in commercial real estate investing with a focus on industrial or institutional properties, can consider the following REITs and ETFs:
- Dream Industrials REIT (DIR.UN): This REIT focuses on industrial properties.
- Chartwell Retirement Residences (CSH.UN): This REIT focuses on healthcare facilities.
- SmartCentres REIT (SRU.UN): This REIT focuses on retail properties where the anchor store is Walmart.
- TD Active Global Real Estate ETF (TGRE): This ETF focuses on real estate holdings throughout the world with 64% of holdings located in the US and 10% in Canada. As a Canadian ETF, this fund gives investors exposure and diversification in their real estate investments without the need to hedge currency fluctuations or settle withholding tax.
- Invesco S&P 500 Equal Weight Real Estate ETF (RSPR-A): An NYSE-ETF that offers investors exposure to non-residential real estate. There are no Canadian equivalents, so investors need to be mindful of withholding tax and currency fluctuations.
Canadian investors interested in AI or robotics can consider the following ETFs:
- Horizons Big Data and Hardware Index ETF (HBGD): This ETF gives you exposure to AI using large data, by dividing up its holdings between three categories: hosting/storage/data centre, semiconductors and blockchain technology. Investors who jumped in at inception got great returns, even with cryptocurrency headwinds over the last few years.
- Emerge ARK AI and Big Data ETF (EAAI): This ETF holds both AI and big data companies in its portfolio. In the ETF space, this fund is small — about $5.5 million in AUM — and there's only one Canadian firm in the mix. Still, the fund has a tight focus and includes well-known brands, including Tesla, Unity Software and Roblox Corporation.
- iShares Exponential Technologies ETF (XT): This ETF is dedicated to the disrupters — any firm that threatens to interrupt existing industries and develop new, faster, better ways of doing things. The list includes: crypto, SaaS, Fintech as well as social media and, overall, there are almost 200 funds held within this ETF. There's good geographical diversification, as well, with companies located in Germany, Japan, China and the US.
- Global X Robotics and Artificial Intelligence ETF (BOTZ): This is one of the biggest AI ETFs in the market with upwards of $2 billion in AUM and more than 40 AI stocks held in the portfolio. Top holdings include NVIDIA, Intuitive Surgical, Kenyencs Corp and ABB Ltd (the global technology leader).
To start investing in REITs or ETFs with a focus on real estate, AI or robotics, you'll need a discount brokerage account. Good options include:
Bottom line
Larry Fink’s optimistic investment outlook underscores the resilience and adaptability of global markets, even amid economic uncertainties and geopolitical tensions. His focus on hard assets and emerging technologies like AI and robotics — and the option to bulk up on alternative assets, such as art — highlights strategic avenues for long-term growth, while his bullish stance on equities signals confidence in the market’s ongoing potential.
For investors, Fink’s insights offer a roadmap to navigate shifting economic landscapes — emphasizing the value of diversification across real estate, infrastructure and cutting-edge innovation. As the financial world evolves, aligning investment strategies with forward-thinking perspectives like Fink’s could position portfolios to capitalize on the transformative opportunities ahead.
Sources
1. ADV Ratings: BlackRock Assets Under Management
2. Product Distribution Strategy: Made in America: Here to stay?: 2024 Reshoring Index
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