It is claimed that Warren Buffett once described the perfect investment as ‘an inflation-linked bond with rising coupons’. This concept—an investment combining a low risk of capital loss with robust inflation protection and real growth—arguably captures what investors are looking for in ‘real assets’. But does such an investment exist in the real world? We believe that a select pool of real assets does in fact possess many of the characteristics of Buffett’s purported ideal investment. They are what we call ‘Preferred Infrastructure’. In this paper we will argue that these assets can provide a contractual inflation-linkage in cash flows, stable returns through economic cycles, a low risk of capital loss, ‘rising coupons’ through real earnings growth, and, finally, diversification benefits via low volatility and low correlations to other asset classes.
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It is claimed that Warren Buffett once described the perfect investment as ‘an inflation-linked bond with rising coupons’. This concept—an investment combining a low risk of capital loss with robust inflation protection and real growth—arguably captures what investors are looking for in ‘real assets’. But does such an investment exist in the real world? We believe that a select pool of real assets does in fact possess many of the characteristics of Buffett’s purported ideal investment. They are what we call ‘Preferred Infrastructure’. In this paper we will argue that these assets can provide a contractual inflation-linkage in cash flows, stable returns through economic cycles, a low risk of capital loss, ‘rising coupons’ through real earnings growth, and, finally, diversification benefits via low volatility and low correlations to other asset classes.
Click on the image below to download the full version of this article
It is claimed that Warren Buffett once described the perfect investment as ‘an inflation-linked bond with rising coupons’. This concept—an investment combining a low risk of capital loss with robust inflation protection and real growth—arguably captures what investors are looking for in ‘real assets’. But does such an investment exist in the real world? We believe that a select pool of real assets does in fact possess many of the characteristics of Buffett’s purported ideal investment. They are what we call ‘Preferred Infrastructure’. In this paper we will argue that these assets can provide a contractual inflation-linkage in cash flows, stable returns through economic cycles, a low risk of capital loss, ‘rising coupons’ through real earnings growth, and, finally, diversification benefits via low volatility and low correlations to other asset classes.
Click on the image below to download the full version of this article