Public Equity Investing in Real Asset ETFs
Historically, investors seeking exposure to real assets—physical assets that have intrinsic value such as real estate or infrastructure—did so by investing in individual companies or specific strategies, such as Master Limited Partnerships (MLPs) or Real Estate Investment Trusts (REITs). However, the investment landscape has evolved. In recent years, several public funds have emerged that focus on the overall real asset market, offering a more streamlined approach to portfolio growth.
For the individual investor, the primary advantage of utilizing a single real asset fund is the ability to achieve immediate diversification at a low cost, reducing the risk associated with holding a single property or company.
Key Facts
- Real asset ETFs provide a low-cost way to diversify across the real asset class.
- VRAI focuses exclusively on income-producing equity securities.
- RLY operates as an "ETF of ETFs," incorporating commodities and fixed income.
- Institutional investors have access to private strategies via firms like Carlyle, KKR, and Oaktree.
Comparing Major Real Asset ETFs
While there are various options available, two major Exchange-Traded Funds (ETFs) dominate the real asset space, each employing a distinct strategy to achieve returns.
Virtus Real Asset Income ETF (VRAI)
VRAI is currently the dominant ETF in this asset class. It maintains a diversified portfolio of income-producing real asset equity securities. A defining characteristic of VRAI is its exclusion of commodities, as these assets do not generate a consistent income stream.
SPDR SSGA Multi-Asset Real Return ETF (RLY)
Unlike VRAI, RLY is structured as an "ETF of ETFs." This means it invests in other funds to gain a broader range of exposure. Its holdings include commodities, gold, and traditional fixed income, specifically Treasury Inflation-Protected Securities (TIPS).
| ETF Ticker | Fund Name | Primary Focus | Includes Commodities? |
|---|---|---|---|
| VRAI | Virtus Real Asset Income ETF | Income-producing equity securities | No |
| RLY | SPDR SSGA Multi-Asset Real Return ETF | Multi-asset (ETFs, Gold, TIPS) | Yes |
Alternative Investment Vehicles
Beyond ETFs, investors can access real assets through mutual funds. Notable examples include the Nuveen Real Asset Income Fund, the T Rowe Price Real Assets Fund, and the DWS REEF Real Assets Fund.
For institutional investors—such as pension funds or endowments—larger investment firms offer private real asset investment strategies. These exclusive strategies are managed by industry leaders including Carlyle, KKR, and Oaktree.
Frequently Asked Questions
What is the main benefit of investing in a real asset fund?
The primary benefit is immediate diversification across the real asset class at a low cost, which is more accessible than buying individual physical assets.
Why does VRAI exclude commodities from its portfolio?
VRAI focuses specifically on income-producing securities; because commodities do not generate income, they are not included in the fund's strategy.
What makes the RLY ETF different from VRAI?
RLY is an "ETF of ETFs" that includes a wider variety of assets, such as gold, commodities, and Treasury Inflation-Protected Securities (TIPS), whereas VRAI focuses on equity securities.
Which firms provide private real asset strategies for institutional investors?
Private strategies for institutional clients are provided by major firms such as Carlyle, KKR, and Oaktree.
What are some examples of real asset mutual funds?
Examples include the Nuveen Real Asset Income Fund, T Rowe Price Real Assets Fund, and the DWS REEF Real Assets Fund.