Can real assets be sustainable?

In building a durable portfolio of alternative investments, investors might deliberate about a range of issues, including how to blend multiple types of real assets, what to take into account in the sustainability of infrastructure and renewable energy investments, whether to consider privately placed infrastructure financing, or the role of natural resources in a portfolio given current conditions. This Alternative Perspectives feature paper compiles views and insights from Macquarie Asset Management on a number of these key issues, designed to help investors who may be aiming to address important questions about real assets and alternatives.

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IMPORTANT RISK CONSIDERATIONS

Investing involves risk, including the possible loss of principal.

The views expressed represent the Manager's assessment of the market environment as of August 2019, and should not be considered a recommendation to buy, hold, or sell any security, and should not be relied on as research or investment advice. Views are subject to change without notice and may not reflect the Manager's views.

Past performance does not guarantee future results.

Diversification may not protect against market risk.

Fixed income securities and bond funds can lose value, and investors can lose principal, as interest rates rise. They also may be affected by economic conditions that hinder an issuer’s ability to make interest and principal payments on its debt. Fixed income securities may also be subject to prepayment risk, the risk that the principal of a bond that is held by a portfolio will be prepaid prior to maturity, at the time when interest rates are lower than what the bond was paying. A portfolio may then have to reinvest that money at a lower interest rate.

“Non-diversified” portfolios may allocate more of their net assets to investments in single securities than “diversified” portfolios. Resulting adverse effects may subject these portfolios to greater risks and volatility.

Investment strategies that hold securities issued by companies principally engaged in the infrastructure industry have greater exposure to the potential adverse economic, regulatory, political, and other changes affecting such entities. Investment strategies that hold securities issued by companies principally engaged in the infrastructure industry have greater exposure to the potential adverse economic, regulatory, political, and other changes affecting such entities.

Private placements may be available only to qualified institutional buyers, may have liquidity constraints, and may not be suitable for all investors. There is the possibility that securities cannot be readily sold within seven days at approximately the price at which a portfolio has valued them, which may prevent a strategy from disposing of securities at a time or price during periods of infrequent trading of such securities.

Currency risk is the risk that fluctuations in exchange rates between the US dollar and foreign currencies and between various foreign currencies may cause the value of the fund’s investments to decline. The market for some (or all) currencies may from time to time have low trading volume and become illiquid, which may prevent the fund from effecting positions or from promptly liquidating unfavorable positions in such markets, thus subjecting the fund to substantial losses.

Credit risk is the risk of loss of principal or loss of a financial reward stemming from a borrower’s failure to repay a loan or otherwise meet a contractual obligation. Credit risk arises whenever a borrower expects to use future cash flows to pay a current debt. Investors are compensated for assuming credit risk by way of interest payments from the borrower or issuer of a debt obligation. Credit risk is closely tied to the potential return of an investment, the most notable being that the yields on bonds correlate strongly to their perceived credit risk.

REIT investments are subject to many of the risks associated with direct real estate ownership, including changes in economic conditions, credit risk, and interest rate fluctuations.

Liquidity risk is the possibility that securities cannot be readily sold within seven days at approximately the price at which a fund has valued them.

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