Institutional investors have steadily increased their allocations to real assets including commodities and energy. In 2006, investors had around $6 billion in commodity and energy assets. Commodity strategies quickly gathered assets, but peaked in 2014 at about $27 billion. Energy assets have exploded to $34 billion from around $2 billion in 2009.
Is it time for a real asset rebound?
Unfortunately, commodity and MLP returns have been less than expected. The total returns of commodity, listed energy companies and master limited partnerships have been flat at best from June 2006 through June 2020. Private funds have experienced varied returns as highlighted from Blackstone Group’s large gain on its sale of Cheniere Energy Partners.
One wonders going forward given low interest rates, central bank intervention and massive economic changes how commodity and energy returns will be going forward? Valuations are certainly low by several historic measures.
Over the past decade, Pensions & Investments has reported more than 600 commodity, MLP and energy hires. The average mandate was for $75.1 million. EnCap Investments, NGP Energy Capital Management and Kayne Anderson Capital Advisors received more than 25 mandates each.