CIO thinks allocations to infrastructure, commodities, and select core real estate could provide portfolios with long-term inflation mitigation, additional diversification, and income generation. (UBS)

Long-term investors should consider real assets, including infrastructure, commodities, and real estate. These can provide investors with additional portfolio diversification and income, as well as the potential for long-term inflation mitigation.


Inflation, though moderating, may remain above central bank targets.


  • US headline CPI inflation slowed to 4% in May, down from a peak of 9.1% last June, but remains well above the Fed's 2% target.
  • Investors should consider the risk that major central banks accept persistent above-target inflation to avoid financial instability from restrictive monetary policy.
  • Structural trends around deglobalization, decarbonization, and demographics may also exert inflationary pressures.

Real assets can provide returns that keep pace with inflation.


  • Real assets include commodities, infrastructure, and real estate.
  • Infrastructure and real estate assets sometimes operate on contracts tied to inflation.
  • Since 2003, infrastructure has typically performed best when global inflation has been high (based on Cambridge Associates Infrastructure Index data).

Long-term exposure to real assets can diversify portfolios.


  • High barriers to entry and the monopolistic positioning of many infrastructure assets make them less sensitive to the economic cycle, potentially dampening portfolio swings.
  • Between 1995 and 2020, global unlisted direct real estate was a diversifier compared to government bonds (–0.1 correlation) and corporate bonds (zero correlation).
  • Gold can be a potential hedge against higher uncertainty (rallying when equity volatility is high) and against a weaker US dollar.

Did you know?


  • Historical annual returns, volatility, and correlation data from the last 25 years demonstrate that allocations to private real estate can complement bonds as a source of income. We note that global unlisted real estate funds have delivered 1.4 percentage points of additional annual return to global corporate bonds, with lower annual volatility.

Investment View

We think allocations to infrastructure, commodities, and select core real estate could provide portfolios with long-term inflation mitigation, additional diversification, and income generation. We forecast gold to reach a fresh all-time high of USD 2,250/oz by June 2024.


Main contributors - Matthew Carter, Vincent Heaney


Content is a product of the Chief Investment Office (CIO).


Original report - Can real assets help diversify my portfolio?, 7 July 2023.