At a Glance
Primary focus
Companies with significant exposure to tangible/hard assets (commodities, real estate, infrastructure, precious metals, energy)
Role in portfolio
Inflation hedge & value anchor
Typical weighting
25–40%
Risk/return profile
Defensive / lower volatility
Key characteristics
Asset-heavy balance sheets, commodity-linked revenues, real asset backing
How This Segment Adds Value
- Strong inflation protection Tangible assets historically preserve purchasing power during inflationary periods
- Currency devaluation hedge Many holdings generate revenues in hard currencies or are globally priced
- Portfolio ballast Low correlation to many growth-oriented technology and consumer stocks
- Valuation discipline Often trades at attractive multiples during periods of depressed commodity prices
Selection and Construction
- Quantitative screens High tangible asset value relative to market cap, strong commodity exposure
- Qualitative filters Management quality, geopolitical risk assessment, sustainability of asset base
- Position sizing Diversified across 8–15 holdings, position limits 3–8%
- Rebalancing triggers Significant commodity price moves, changes in asset quality or leverage
Why It Matters
- Preservation of real capital Critical in environments of persistent inflation or monetary debasement
- Diversification benefit Reduces portfolio drawdowns during equity bear markets driven by rising rates/inflation
- Long-term compounding High-quality asset owners often deliver attractive total returns over multi-decade periods
- Strategic asymmetry Offers protection precisely when many conventional equity strategies struggle