Why Investors Are Turning to Real Assets in an Era of Scarcity

Real assets are gaining attention as global markets move from a 15-year “era of abundance” to an “era of scarcity.” Persistent inflation, underinvestment, and fragile supply chains are driving this shift.In a recent webcast hosted by VettaFi Head of Research Todd Rosenbluth, Cohen & Steers portfolio managers Vince Childers and Tyler Rosenlicht explained why real assets could play a larger role in this new market regime. They highlighted real assets as a way to support economic growth, hedge inflation, and diversify portfolios.Key Takeaways A global shift toward supply scarcity and sticky inflation requires a fundamental rewiring of portfolio construction. A $27 trillion infrastructure funding shortfall presents a major growth runway for active real asset strategies. Advisors can hedge inflation and diversify portfolios by establishing a permanent 20% allocation to real asset ETFs. The Era of Scarcity & The $27 Trillion Global Infrastructure ShortfallThe period from 2008 through 2022 was characterized by falling inflation, relatively low capital spending, global stability and ample commodity supply. The coming decade could look very different, with greater inflation uncertainty, supply disruptions, wage pressures and competition for resources. Four major supply shocks in six years — including the COVID-19 pandemic, Russia’s invasion of Ukraine, shifts in trade policy and conflicts in the Middle East — have highlighted the vulnerabilities of global “just-in-time” supply chains. Companies and governments are increasingly looking to build more resilient supply networks and bring production closer to home. Central to this new macroeconomic landscape is a massive global deficit in physical infrastructure. Updated World Economic Forum estimates indicate that satisfying global economic growth requires $106 trillion in infrastructure investment through 2040. Because constrained global governments are expected to fund only $79 trillion of this total, a $27 trillion shortfall remains for private capital to satisfy. This funding gap covers critical power systems, transport hubs, water facilities, and energy infrastructure. It creates a generational growth runway for private investors, public real asset companies, and active managers deploying physical capital. See More: Cohen & Steers Expands Active ETF Lineup With Real Assets FundAI Expansion and Power Grid BottlenecksThe rapid growth of artificial intelligence and re-industrialization is significantly compounding these infrastructure demands, particularly across electricity networks. While technology hyperscalers are projected to spend nearly $1 trillion annually on CapEx by 2027, physical grid limitations pose immediate bottlenecks. Data centers account for 55% of US electricity demand growth through 2030. Commercial and industrial expansion make up the remaining 45%. Illustrating this acceleration, a Midwest utility founded in 1880 spent 145 years building 11 gigawatts of power capacity. However, it currently faces a customer backlog requesting an additional 15 gigawatts. This utility must effectively shift its execution pace from building one gigawatt per decade to one gigawatt per quarter. Meanwhile, local opposition to data centers is surging, with local moratoria rising from 92 in June to over 530. In addition, key commodities like copper are reaching record prices due to a decade of supply-side underinvestment.Navigating Return Dispersion With Active ManagementNavigating these physical, regulatory, and commodity dynamics requires an active approach due to the high dispersion of returns within real asset sectors. Regulatory decisions alone drove a nearly 50% performance spread between the best and worst-performing utility stocks in a single year. Cohen & Steers manages this environment by allocating roughly 20% of active risk to top-down tactical shifts. The remaining 80% is allocated to bottom-up security selection. Furthermore, real asset correlation to broad equity indexes like the S&P 500 has dropped to career lows.Implementing the 50/30/20 Portfolio Framework With Real Asset ETFsTo capitalize on these secular trends while hedging inflation, the speakers advocated replacing traditional asset frameworks. They proposed a 50/30/20 model: sourcing 50% from equities, 30% from fixed income, and 20% from real assets. Blending diverse real asset categories reduces overall portfolio volatility while preserving positive inflation sensitivity. Investors can access these strategies through Cohen & Steers ETFs like the Diversified Real Assets ETF (CSRA) and the Cohen & Steers Infrastructure Opportunities Active ETF (CSIO). Additional targeted options include the Cohen & Steers Real Estate Active ETF (CSRE ), Cohen & Steers Natural Resources Active ETF (CSNR ), and Cohen & Steers Future of Energy Active ETF (CSEN). Because market dislocations occur rapidly, establishing a permanent real asset allocation early avoids the significant opportunity costs associated with trying to time long-term physical capital cycles. Rosenlicht closed with a clear warning against sitting on the sidelines: “You oftentimes lose more trying to get it perfect than you gain by just being right in the long run”. Childers reinforced that real assets serve as an essential risk-management foundation that protects portfolios against unexpected inflation shocks while capturing multi-decade CapEx growth. For more news, information, and analysis, visit VettaFi | ETFDB.