In the Thematic Investing series, Tom Lydon, CEO of ETF Trends and ETF Database, alongside experts and innovators from Goldman Sachs, sheds light on thematics, one of the most popular alternative investments, and how they can benefit advisors and investors. In the sixth and final episode of the series, Lydon is joined by Kristen Kuney, managing director and global head of liquid real assets at Goldman Sachs Asset Management, to discuss the Goldman Sachs Future Real Estate & Infrastructure Equity ETF (GREI ).
Kuney explains that GREI offers advisors and investors an integrated approach to gaining exposure to infrastructure as well as real estate assets, the underpinnings of society and the economy.
“Think about these assets being relatively stable in demand, predictable cash flows, and which offer also a nice dividend yield for investors over time,” Kuney says.
Real estate investment covers a range of different options, but Goldman Sachs focuses on the categories within real estate that have exposure to secular growth trends; these include data transportation, innovation in the energy transition to net-zero carbon emissions, demographic shifts, and social sustainability. Specific examples are the buildout of 5G by cellphone companies and the real estate it will require, as well as the current short supply of affordable housing and the related investment opportunities.
Speaking to emerging markets, Kuney explains that around 5% of the fund is allocated to emerging market exposure and talks about how Goldman Sachs invests within these markets.
“A lot of our investments are regulated and are driven by certain policies,” Kuney says. “We have to have a good, on-the-ground sense of those regulations, and governments are in a lot of ways controlling a number of these assets, so we have to have that confidence that our interests are also in the best interests of the government,” Kuney says.
Investing in real estate and infrastructure can offer diversification potential for a portfolio against fixed income as well as broad equities, and GREI offers the possibility of a growing yield over time. These particular asset classes are ones that Kuney and Goldman Sachs believe benefit in rising rate environments, such as what the U.S. is experiencing and is expected to continue to experience going forward in 2022.
“This asset class is actually a beneficiary of rising inflation both from a cash flow perspective as well as an incumbent value perspective,” Kuney says. “As we look across the world as inflation has spiked, this has actually helped our companies in terms of cash flow, which will go into dividend growth over time.”
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