Definition of Real Assets

Real assets are tangible investments whose value derives from their physical properties and the essential services they provide. Unlike financial assets—such as stocks and bonds, which represent claims on future cash flows—real assets include real estate, infrastructure, natural resources, and commodities. Their worth is rooted in their material existence and their direct contribution to how societies function and grow.

At their core, real assets are what make modern life possible. Homes, office buildings, and factories provide space to live and work. Highways, airports, and ports enable the movement of people and goods. Energy infrastructure powers economies, while farmland and timberland produce the food and raw materials that sustain populations. By investing in real assets, individuals and institutions are investing in the building blocks of economic activity.

Types of Real Assets

Real assets can be categorized into several broad types, each with distinct characteristics and roles in the economy:

• Real Estate: Residential housing, commercial office towers, industrial facilities, and mixed-use developments. Real estate is often considered the most accessible form of real asset investment, with options ranging from direct property ownership to publicly traded real estate investment trusts (REITs).
• Infrastructure: Assets that provide essential services, such as roads, bridges, airports, seaports, utilities, renewable energy facilities, and communication networks. These are often long-lived, capital-intensive projects that generate stable, utility-like cash flows.
• Natural Resources: Farmland, timberland, and mineral reserves. These assets derive value from their ability to produce essential goods, from crops and livestock to lumber and energy resources.
• Commodities: Physical raw materials such as oil, natural gas, metals, and agricultural products. While often more volatile, commodities play a central role in global supply chains and can act as a hedge against inflation and geopolitical risk.

Real Assets vs. Financial Assets

To fully understand the distinct role of real assets, it is helpful to compare them with financial assets. While both categories can be part of a diversified portfolio, they differ fundamentally in nature and value drivers:

The distinction matters because real assets often behave differently across market cycles. While financial assets are heavily influenced by interest rates, corporate earnings, and investor sentiment, real assets are tied to long-term demand for essential goods and services. This can make them attractive diversifiers within institutional and individual portfolios.

Why Real Assets Matter

Real assets form the backbone of the global economy and society at large. They are indispensable in ways that extend far beyond investment portfolios:

• Housing and shelter: Residential real estate provides one of humanity’s most basic needs.
  • Economic productivity: Commercial and industrial real estate create spaces for commerce and innovation.
  • Connectivity: Infrastructure projects facilitate trade, travel, and communication.
  • Energy and resources: Natural resources and commodities fuel modern life and industry.

Because of their connection to physical supply and demand, real assets often move in line with inflationary pressures. When the cost of living rises, the value of housing, farmland, or energy resources often increases as well. This makes real assets an important hedge against inflation, particularly in periods of macroeconomic uncertainty.

For investors, real assets also bring the benefit of diversification. They are less correlated with traditional equity and fixed-income markets, which can help stabilize portfolios in volatile times. Pension funds, endowments, and sovereign wealth funds have long allocated to real assets for precisely this reason.

Risks and Considerations

While the benefits of real assets are clear, they also present a unique set of risks that must be carefully managed:

• Regulatory and policy risk: Infrastructure and natural resources are highly sensitive to government policy, permitting, and environmental regulation.
  • Interest rate risk: Rising rates can reduce the attractiveness of capital-intensive projects and depress property values.
  • Liquidity risk: Unlike publicly traded securities, many real assets are difficult to buy and sell quickly.
  • Operational risk: Real assets often require specialized expertise to operate and maintain, from construction management to agricultural oversight.

Investors must weigh these risks alongside the potential rewards. A disciplined, research-driven approach—grounded in both academic insight and practitioner experience—is essential to long-term success.

The Steers Center Perspective 

At the Steers Center for Global Real Assets, we believe that real assets are not just an asset class—they are the foundation of the real economy. Our mission is to advance the study and practice of real assets through rigorous research, innovative teaching, and strong connections to industry. By engaging students, faculty, and practitioners, we aim to develop leaders who understand how real assets shape economies and societies.

Under the leadership of Matthew Cypher, the Steers Center combines the resources of Georgetown University with deep industry expertise. We focus on applied learning, bringing theory to life through real-world projects, practitioner-led coursework, and exposure to leading firms in real estate, infrastructure, and related sectors.

Author:  Matthew L. Cypher, Ph.D., is the Atara Kaufman Professor of Real Estate and the Academic Director of the Steers Center for Global Real Assets at Georgetown University’s McDonough School of Business.

Frequently Asked Questions (FAQs) about Real Assets