Real estate and infrastructure are expected to remain the most popular of all the real asset sectors in 2019, despite increasing leverage in real estate and slow distributions in infrastructure, industry executives say.
The new year is expected to build on the asset classes' popularity in 2018.
In 2018 as of Dec. 20, infrastructure funds raised a total of $83.8 billion worldwide, compared to 88 funds that closed on $75.1 billion in all of 2017, a record year in terms of total capital raised by infrastructure funds, according to London-based alternative investment research firm Preqin.
"The biggest growth in real assets is in infrastructure, although it started from a base that was non-existent and it has grown from that," said Brent Burnett, Portland-based managing director, real assets at Hamilton Lane Inc. "Investors are attracted to the income, long-term contracted cash flow."
Capital is also expected to continue to flow into real estate. Through Dec. 20, real estate funds raised $94 billion in 212 funds, compared to $126 billion raised by 379 funds in all of 2017, Preqin data show.
The combined $197.5 billion raised by real estate and infrastructure funds amounted to 90% of the $219.3 billion raised in real asset funds in the same time period.
Aside from real estate and infrastructure, fundraising efforts in other real asset sectors, including energy, agriculture, metals and mining, and farmland, "continue to be challenged," Mr. Burnett said.
He expects these trends to continue into 2019.
"In energy, there is lots of volatility at the commodity price level," he said. "Returns have been disappointing. It's been a challenging exit environment."
There still will be good energy investment opportunities, but investors have to be selective where they invest capital, Mr. Burnett said.