Canada money managers eye real assets for diversity

Sun Oct 13, 2013 4:42pm EDT
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By Andrea Hopkins

TORONTO (Reuters) - When Canada's big pension funds started to diversify out of stocks and bonds, they turned to real assets in a bid for better returns. But buying real estate, infrastructure and commodities isn't just for big players anymore, and Canadian asset managers are offering them to ordinary clients.

After years of putting inflation worries on the back burner because global growth is subdued and interest rates are at historic lows, money managers are rolling out more products aimed at protecting against inflation and spreading risk.

"I really believe everybody should have some access to real assets. It primarily goes back to preservation of wealth and the possibility to create wealth as well. It's got the inflation protection that other types of assets may not give you," said Steve Yuzpe, chief financial officer at private equity firm Sprott Resource Corp.

Canadian pension funds now typically hold 17 percent to 25 percent of real assets buying pipelines, farmland, energy and gold getting a return on investment that has long attracted anyone wealthy enough to be able to afford such things.

When he managed the money of wealthy families, Som Seif saw how real assets played a role in their portfolios. Now, the Canadian exchange-traded-fund (ETF) pioneer and founder of Purpose Investments wants to provide the same access to all Canadians, but at a lower cost.

"A billionaire family is always thinking about protection of wealth versus enhancing wealth. They want to grow their asset and protect the downside," said Seif, who opened five, low-fee funds including the Purpose Diversified Real Asset Fund, available as an ETF, last month.

Seif said his diversified fund which invests across five main real asset categories - agriculture, base metals, precious metals, energy and real estate - is better than picking a gold ETF, a REIT, an energy ETF and the like, because Purpose's active management regularly rebalances the fund according to quantitative rules, not investor-driven emotion.

Seif also includes both physical assets like gold, silver, oil, corn, soy and cash in the fund, as well as the companies that produce such assets or manage them, like RioCan REIT, Monsanto Co, and Teck Resources Ltd.   Continued...