Cohen & Steers Expands With Inflation-Sensitive Hard Assets Fund

Along with REITs, new fund includes gold, commodities and natural resources, along with short-term currency instruments

Cohen & Steers (CNS), known for its real estate expertise, has launched a mutual fund designed to provide return and temper volatility while also taking advantage of rising inflation. The Cohen & Steers Real Assets Fund (RAPAX) includes five sleeves of investment vehicles designed as a total return fund that is also meant to help portfolios “overcome the corrosive effects of inflation,” according to firm co-chairman and co-CEO Robert Steers.

Yigal JhiradIn a press briefing on Wednesday, the portfolio manager of the new fund, Yigal Jhirad (right), said the new fund is designed to provide diversification “across real assets” and due to the low correlation of several of those real assets to each other, together the fund “helps create a smoother return stream.” Moreover, Jhirad says, each sleeve in the fund’s mix “helps diversify inflation risk,” meaning the fund is “poised to do well in a growing economy.”

RAPAX, which was launched Jan. 31, 2012, and is available in five share classes, holds five “real” asset classes, each in the following allocation ranges:

  • Gold, in the form of both gold bars and gold ETFs: 0%-15%
  • Fixed income, short-term instruments in both USD and non-USD currencies: 5%-20%
  • Global REITS, across various commercial properties: 25%-35%
  • Commodities, including energy products, metals and agriculture: 25%-35%
  • Global natural resource equities, in energy, mining, metals and agribusiness: 15%-25%. 

Cohen & Steers will manage the gold, fixed income and real estate sleeves, while London and South African-based Investec will manage the natural resource equity sleeve, and  New York-based institutional shop Gresham Investment Management will be subadvisor to the commodities sleeve. Regarding the commodities sleeve, Cohen & Steers’ president and CIO Joseph HarveyCohen & Steers’ president and CIO Joseph Harvey (left) pointed out that unlike most managed futures strategies, the commodities investments  will be actively managed by Gresham.

Jhirad said that the average consumer’s experience of inflation is “not reflective” of CPI, pointing out the higher price growth of college, healthcare and food, not to mention gasoline. “Each individual has their own unique basket of goods” by which they measure inflation, so he suggests that CPI plus “400 basis points is a much more accurate measure of inflation; that’s why you need to take more risk” in your portfolio to keep pace with inflation. The fund does not invest in TIPS, which Cohen & Steers argues have underperformed real asset classes in periods of rising inflation since it is pegged to CPI alone which understates real inflation.

Jhirad argued that an allocation to real assets should be in the 10%-20% range, instead of the standard 2%. The new fund, he said, “creates a rational mix of assets that are difficult to access on your own,” especially in a 40 Act mutual fund.

As for cost, the current net expense ratio of the fund is 1.39%; the fund also carries a 25 basis-point 12b-1 fee.

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