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Most investment vehicles are at least somewhat intangible—even stocks represent a claim on ownership of a portion of a publicly traded company. Real assets, by contrast, are physical. These include real estate, infrastructure, and natural resources, among others.
By investing in privately held real assets, investors may be able to generate returns through long-term contracts, income, or asset appreciation. Private real assets are therefore an increasingly popular tool for investors seeking alternatives to traditional equities and bonds—and especially for those looking for inflation protection and income stability.
Key Takeaways
- Private real estate and infrastructure offer long-term, inflation-resistant income streams.
- These assets are often illiquid but can be accessed through private funds, syndicates, or platforms.
- Infrastructure and natural resources may provide lower volatility and steady returns over time.
- These investments typically require longer holding periods and are best suited for long-term investors.
- Real assets can complement a diversified portfolio and hedge against public market risk.
What Are Private Real Assets?
Private real assets are tangible, physical assets with value tied to those physical properties. These assets are private insofar as they are not traded on public markets or exchanges. This means that investors will need to find specific means of accessing these assets, such as private funds or dedicated platforms. As a result, private real assets tend to be illiquid compared to other types of financial and intangible assets.
Private real estate, infrastructure, and natural resources are three of the most important types of private real assets investors should be aware of.
- Private real estate: Income-generating properties not traded on public markets (e.g., multifamily buildings, warehouses, student housing).
- Infrastructure: Long-lived physical systems like toll roads, airports, and energy pipelines.
- Natural resources: Timberland, farmland, and energy-related assets like mineral rights.
These investments are typically accessible via private equity-like funds, syndicates, or similar sources.
Benefits and Considerations
Why should investors go to the trouble of buying private real assets when it may be much more straightforward to stick to traditional assets? There are many potential benefits to private assets that set them apart from other investment vehicles.
Potential Benefits:
- Inflation hedge (especially for infrastructure and real estate)
- Long-term income and cash flow
- Low correlation with public markets
Private real assets are popular hedges against inflation because their value is intrinsically tied to the physical property itself and because, in many cases, these assets come with contractual or regulatory inflation protection.
For example, consider an infrastructure investment. These are hard assets used to make essential services in a community, such as transportation, power, or utility services. They may generate revenue through concessions (charging users a toll or fee, for example) or contractual or regulatory guarantees. All of these provide some protection against inflation that may not be available in stock investments.
Besides the inflation-related benefits of real assets, they also provide the potential for long-term income and cash flow that is not correlated with public markets. In the infrastructure case above, for example, imagine a parking garage investment. Customers will continue to use a garage’s service regardless of many market fluctuations, and fees generated from vehicle parking provide a relatively stable source of long-term cash flow.
At the same time, investors should also be aware of some important considerations or risks associated with private real assets.
Considerations:
- Illiquidity (lock-up periods may be several years)
- High minimum investments
- Access often limited to accredited investors
- Asset-level risk (e.g., tenant vacancies, regulatory delays)
One of the major concerns many investors have with this type of asset is its illiquidity. In addition to being difficult to access, a private real asset investment may subject investors to significant lock-up periods of many years. These investments may also require prohibitive high minimums for many retail investors. Similarly, some private real assets may be limited to certain types of investors, including those who are properly accredited.
For those investors able to access this alternative asset class, there are additional risks dependent upon the exact type of investment itself. A natural resources investment, for example, carries risks associated with the depletion or tainting of the resource itself. Investments in private real estate may be subject to risks associated with tenant vacancies or lapsed payments.
Note
Many types of private real assets have risks linked to regulation, which may change in an unfavorable way during a long-term investment.
How To Access Private Real Assets
Most individual investors will access private real assets through specialized funds or platforms. For private real estate, a private real estate investment trust (REIT) may function similarly to a publicly traded REIT, although access is only available through private markets. Real estate syndications are an alternative and consist of a pool of investor funds, typically organized by a sponsor.
In the infrastructure landscape, there are dedicated funds focused on infrastructure of different types and locations. Investors may also be able to make direct investments into particular projects.
Natural resource investment may include everything from purchasing commodities to purchasing land, rights, and so on. For some investors, partnering with a timber investment management organization (TIMO) may be a viable strategy for making an indirect investment in timberland.
Investing Platforms for Private Real Assets
One of the most straightforward ways to gain access to private real assets is through a dedicated platform connecting interested parties.
- Fundrise is a platform that includes access to private assets like real estate.
- Yieldstreet operates a similar platform to provide retail investors access to assets typically only available to institutional investors.
- Acretrader lists farmland for private investment, with the platform providing all aspects of administration and property management.
Tip
These platforms may be the best option for many individual investors, as institutional funds often have high barriers to access.
What’s the Difference Between Private and Public Real Estate Investing?
Public real estate investing is commonly achieved indirectly and through a publicly traded REIT, shares of which are bought and sold via stock exchanges. This makes public real estate investing an accessible option for many investors, although this approach may be more volatile. Private real estate investing is done either by direct ownership or via a private partnership, syndication, or REIT. While these investments may be less liquid and often have lock-up periods, they also tend to be less volatile.
How Do I Evaluate Infrastructure Opportunities?
There are many different types of infrastructure investments, but key considerations in all cases include the degree of development of the project, anticipated maintenance needs and costs, the source and stability of cash flow, regulatory risks, whether there is demand or volume risk, and how the investment fits into your broader portfolio and strategy.
How Long Is My Money Typically Tied Up?
Private real asset investments may require investors to abide by a lock-up period of several years or beyond, potentially reaching a decade or more. However, this is entirely dependent upon the specific investment.
The Bottom Line
Private real estate, infrastructure, and natural resource investments can add durable income, inflation resistance, and diversification to a portfolio. While access and liquidity remain hurdles, platforms and fund options make these assets more accessible to long-term investors ready to think beyond public markets.
