Hedgehog is here to help demystify at least one of them for you - real assets. So what exactly are real assets and how do you access them?
‘Real assets’ is an asset class that includes investments in real estate and infrastructure. They have an inherent physical worth and can feel more solid than financial assets, such as stocks and bonds that are defined by intangible contractual rights. Real assets often store long-term value better than financial investments due their direct link to physical assets. Moreover, their value may also increase due to higher utilisation, greater demand or scarcity of supply.
You’ve probably seen real estate investing pop up on various investment platforms already. The assets would usually be in the category housing or offices, but real estate is much more than that. It can cover:
Quite often, a real estate asset can be used for multiple purposes. For example, offices on top floors and retail on the ground floor. In that case, properties are referred to as ‘mixed-use’. When a property is leased to tenants that are using the premises for income-generating activities, we refer to it as ‘Commercial Real Estate (CRE)’. CRE is often owned and managed by larger institutions – such as real estate developers or financial firms – instead of private individuals.
The infrastructure asset class can be divided into two categories: economic and social infrastructure. Some examples of economic infrastructure are:
Sectors within social infrastructure can include:
You can see how at times there can be an overlap with real estate, when considering investments in social infrastructure.
Size plays a big part here. Commercial real estate and infrastructure investments are large-scale projects, so it is important that they are managed by operators of an institutional standard with an established track record, who can deliver high-quality, finished projects and maintain them on an ongoing basis. Duration is another big factor. The long-term nature of real asset investments requires lengthy documentation to define the contractual obligations between the financial investors and day-to-day operators of the asset.
Because the paperwork is complex, access to high-quality real assets has so far been restricted to institutional investors such as banks, pension/mutual funds, insurance companies and high net worth individuals. What’s more, because of their capital intensive nature, real asset investments require hundreds of thousands or millions in minimum capital commitments, which again, is only possible for institutional investors.
As a result, individual investors with lesser capital to invest have been limited to investing in private residential projects. These may not be managed by credible operators, have little oversight from regulatory bodies and may deliver limited upside potential because of their smaller scale.
Even though the above makes it sound difficult for individual investors to invest in real assets, it is still worth considering finding a way. No need to look too far though. At Hedgehog, we partner with asset owners to create digital tokens representing assets such as industrial warehouses, commercial real estate and solar farms. Our smart contracts make the investment process more streamlined, allowing individual investors to invest alongside institutional investors. Hedgehog lets you invest in the physical world around you from as little as $5K, all from your phone.
Nothing in this article constitutes financial advice or guidance. The content in this article is an opinion and is for general information purposes only. It is not intended to be financial advice. The value of your investment can go up or down so you may get back less than your initial investment.