1. Can you give a brief overview of your strategy in terms of what you are trying to achieve for investors, your investment process and the make-up of the investment team?
Our real assets strategy at Cohen & Steers is focused on providing investors with attractive long-term total returns while maximizing real returns during inflationary environments.
The strategy is built around a range of core liquid, exchange-traded real asset categories, including global real estate, commodities, global infrastructure, and natural resource equities. By combining a diversified range of asset classes, each with unique return drivers and inflation dynamics, we aim to provide investors with exposure to real assets in a way that delivers attractive long-term return potential while mitigating risk through strategic diversification.
Our investment team utilizes a top-down asset allocation approach combined with a bottom-up sector and security selection style. Cohen & Steers portfolio managers manage all underlying investments, and each has complete discretion and responsibility for their respective sleeves of the strategy. Our analysts primarily generate investment ideas for the underlying strategies, and the investment teams regularly meet to review and discuss these ideas. Finally, because we all work together so closely, we're able to take a highly collaborative approach that allows for sharing of expertise and insights across teams, providing opportunities for generating outsized alpha potential.
2. How are you currently positioning your portfolio?
Because we intend the portfolio to function as viable a long-term, strategic allocation, we believe it's critical to ensure that we're always adequately diversified. In terms of our top-down allocation process, that means restricting our investments across the sleeves to well-defined allocation ranges at all times. Still, we do give ourselves room to tilt our allocations in directions that reflect our best thinking around relevant fundamental and secular trends.
Currently, our top-down positioning is almost entirely driven by where we're finding the best relative value across the core real assets. We think we're more likely to be rewarded for being patient and waiting for valuation gaps to close than we'll be for taking strong views on where, for example, the market or interest rates may go over the next month or quarter.
In terms of bottom-up positioning, each team has the flexibility to follow its own unique investment process, with the goal of outperforming their respective, sleeve-level benchmarks. That said, we generally prefer to see a higher level of true "idiosyncratic" alpha from our portfolio managers, which likewise tends to steer us toward a more security-level, fundamentals-based approach to positioning, as opposed to more style- or factor-based methods.
3. Can you identify a couple of key investment opportunities for your fund you are playing at the moment in the portfolio? This could be at a stock, sector or thematic level.
Being focused on relative value at the moment, we currently favor natural resource equities, as all sectors—energy, agriculture and mining—and the asset category overall presents a compelling deep value opportunity. We also like the value we're seeing in global infrastructure, and with most infrastructure businesses generally able to pass rising costs along to consumers we like the group's growth prospects against a still-inflationary backdrop.
We currently have a tactical underweight in commodities, primarily due to concerns around commodity spot price volatility. However, we believe commodity markets have more than priced in a mild global recession scenario and that the category has solid longer-term fundamental, macro and valuation support. While we're underweight in global real estate, this really has more to do with the value on offer in some of the other core real assets. But with the correction in share prices, we have seen vastly improved valuations and think real estate is now also offering attractive return potential, especially relative to broad equities. Overall, we like the value opportunity across most of the real assets universe.
Vince Childers, Senior Vice President, is Head of Real Assets Multi-Strategy at Cohen and Steers
