A new ETF is making big bets on real estate and other hard assets.
CBRE Investment Management launched the IQ CBRE Real Assets ETF in May with the belief that it will deliver inflation protection in a rising interest rate environment.
“The ETF market is lacking options in this area,” ETF portfolio manager Dan Foley told CNBC’s “ETF Edge” on Thursday. “There’s a lot of opportunity here with world changes in things like digital transformation, decarbonisation, and then, frankly, a bad price in the market.”
Foley pointed out that global financial institutions are already in the space and said he believes retail investors should be as well.
“This has been one of the most attractive sectors of the real estate universe,” Foley said. “Valuations are very strong. … [The] elements are in place for a very strong overall result going forward.”
CBRE’s new ETF is hitting the market as momentum around artificial intelligence and technology companies dominates Wall Street.
Foley contended that hard assets, in general, are an important diversification away from technology – particularly hot AI stocks. Furthermore, he noted that hard assets are essential in enabling a digital economy in the first place.
“Data centers, cell towers, enabling decarbonisation – you need these major infrastructure companies to make that investment. It’s driving growth that we think will drive a different outcome ,” he said.
According to the issuer New York Life Investments, the main holdings of the fund are in real estate and facilities. They include Public storage, Crown Castle, Nextera Energy and Equinix (EQIX), which is considered a leader in data centers.
Equinix shares are up 7% over the past month.
“Equinix is a great example of a world-leading organization,” Foley said. “That’s the kind of asset you want. These are essential to the new economy.”
Since the IQ CBRE Real Assets ETF launched on May 10, it’s down nearly 6%.
