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Resiliency and diversification from uncorrelated market exposure
- Diversification creates resilience — a much-needed portfolio characteristic amid market volatility and the uncertain outlook for inflation and interest rates as economies hopefully emerge from the pandemic.
- Private investments in relatively illiquid categories of real assets — farmland, timberland and commercial real estate — have exhibited low or negative correlations to stocks and bonds, diversifying portfolio risk. For the past two decades, real assets have generated higher returns than traditional investments, with significantly lower volatility.
- Portfolio optimization using 29 years of returns demonstrated private real assets’ potential to improve the risk-adjusted returns of traditional stock-bond portfolios, and to diversify risks associated with publicly traded commodities and real estate investment trusts (REITs).
- Results supported combining multiple categories of real assets and constraining overall allocations within practical limits, such as 10% or 20%.
Risks and other important considerations
This material is presented for informational purposes only and may change in response to changing economic and market conditions. This material is not intended to be a recommendation or investment advice, does not constitute a solicitation to buy or sell securities, and is not provided in a fiduciary capacity. The information provided does not take into account the specific objectives or circumstances of any particular investor, or suggest any specific course of action. Financial professionals should independently evaluate the risks associated with products or services and exercise independent judgment with respect to their clients. Certain products and services may not be available to all entities or persons. Past performance is not indicative of future results.
Economic and market forecasts are subject to uncertainty and may change based on varying market conditions, political and economic developments. As an asset class, real assets are less developed, more illiquid, and less transparent compared to traditional asset classes. Investments will be subject to risks generally associated with the ownership of real estate-related assets and foreign investing, including changes in economic conditions, currency values, environmental risks, the cost of and ability to obtain insurance, and risks related to leasing of properties.
Real Asset investments may be subject to environmental and political risks and currency volatility.
The TIAA General Account is an insurance company account and does not present an investment return, and is not available to investors.
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