A New ETF Makes It Easier To Embrace Real Assets

With inflation supposedly benign and with the Federal Reserve perhaps just days away from raising interest rates for the first time in nine years, the hard/real assets investment theme has been dealt multiple blows. But with so many real assets already having endured dramatic declines, contrarian investors might want to revisit the asset class that includes natural resources and real estate.

The FlexShares Real Assets Allocation Index Fund ASET, which debuted Monday, grants investors one-stop access to an array of real assets because the new exchange traded fund holds three other FlexShares ETFs: The popular FlexShares Morningstar Global Upstream Natural Resources Index Fund GUNR, FlexShares STOXX Global Broad Infrastructure Index Fund NFRA and the FlexShares Global Quality Real Estate Index Fund GQRE.

ASET “seeks to provide investors with a core real assets allocation that helps address their inflation-hedging, diversification, and income needs. Designed to serve as a real assets allocation solution, the strategy applies a proprietary optimization to the three underlying funds in an effort to minimize the volatility of returns and lower risk in the fund,” according to FlexShares.

The new ETF's current lineup features a combined allocation of just over 90 percent to NFRA and GQRE with GUNR commanding a weight of 9.7 percent. Of those three ETFs, only GQRE has traded higher this year while GUNR has been punished with a 19.3 percent year-to-date loss because the share prices of many of its holdings are intimately correlated to commodities prices.

“Institutional investors and independent advisors are increasingly turning to real assets such as natural resources, real estate and infrastructure for portfolio diversification and risk management," said Shundrawn Thomas, head of Northern Trust's Funds and Managed Accounts Group, in a statement. "The FlexShares Real Asset Index Fund delivers an optimized mix of innovative real asset strategies in a simple index-based solution.” 

ASET charges 0.57 percent per year, or $57 for every $10,000 invested.