Real Assets – We have lift off

At W1M we pride ourselves in offering clients access to alternatives which, in combination with the traditional equity and fixed income asset classes, can be a really powerful addition to multi-asset portfolios. The ability to generate uncorrelated returns is a key tool in the quest to move the efficient frontier to the left and optimise risk-adjusted returns. BUT we also see the alternatives universe as standing up on its own two feet as an extremely attractive asset class.

In 2025 we have seen the W1M's Waverton Real Assets Fund deliver +14% returns whilst global equities and bonds have delivered +10% and +4% respectively[1]. Longstanding themes such as gold have played their parts, with the precious metal up +42% year-to-date and now through the $3,700 level.

Gold vs S&P 500 in the 21st Century

Source: Bloomberg, W1M. Data as at 29 August 2025

[1] Source: Morningstar, as at 22 September 2025, in GBP. MSCI ACWI and ICE BofA Global Broad Market hedged.

But there has been another, potentially underappreciated, source of returns this year…

Real, active value – a case study

We have often posited that investors who want access to alternatives should ensure that they find a genuinely active manager who can offer exposure to the space, particularly given the challenges of investing in alternatives through passive implementation. We at W1M have taken that one step further: across our Real Asset portfolio we have engaged directly with companies to ensure they are realising value for shareholders. We have had success, not only in ensuring shareholder friendly proposals have been adopted (e.g. the announced realisation strategy from life science company, Syncona) but opening up the possibility of third-party acquisitions.

Urban Logistics REIT has been a case in point. In March of this year, the board of the logistics real estate portfolio announced an internalisation which would have taken place on very unfavourable terms for shareholders. W1M fed our opposition directly back to the board and engaged with other concerned shareholders to convene an Extraordinary General Meeting to replace a number of the REIT’s directors. Ultimately, our agitation efforts bore fruit as, on the 11 April 2025, it was announced that LondonMetric Property was bidding to acquire the company. The share price of Urban Logistics was up over 50% in 2025 by the time of our disposal and goes some way to demonstrating the value in accessing Real Assets through genuinely active investment management.

W1M engagement in 2025

Source: Bloomberg, W1M. Data as at 30 June 2025

That’s not to say all the value in the Real Assets universe has been realised! We continue to see high quality assets trade at meaningful discounts to their intrinsic value. In particular, in the Infrastructure sector we’re seeing portfolios trade at discounts of 20%+ despite providing access to contractual cash flows often explicitly inflation linked and government backed: take HICL Infrastructure for example, this core-infrastructure company owns concessions for government-backed economic and social infrastructure projects such as roads and hospitals. Some basic, relatively conservative assumptions for a mid-single-digit annual return and a narrowing of the discount points to annualised returns of >10% for the next three years – these are extremely attractive prospective returns from largely government-backed cash flows, especially in the context that the 10-year gilt yield is now c.4.7%[2] (and does not benefit from any index linkage).

[2] As at 23 September 2025

Infrastructure opportunities

Source: Bloomberg, W1M. Data as at 30 June 2025

External validation

But don’t just take our word for it. Corporate activity in the Real Assets space continues to provide encouraging external validation of our view of the value on offer (as well as a rapid route to realising that value).

September alone has seen major announcements from our holdings in PRS REIT and Air Lease Corporation. PRS REIT, a long standing holding for the W1M Real Assets Fund, was undergoing a strategic review and announced: firstly, that major private equity firm, KKR, was interested in acquiring the assets and taking part in due diligence; and then, ultimately, that it had agreed to sell its portfolio of assets for c.£650m.

Air Lease Corporation is a portfolio of commercial aircraft which was poised to benefit from an attractive supply/demand dynamics in the aircraft industry as manufacturers (Boeing and Airbus) struggled to keep up with demand. We invested into Air Lease in early February of this year at c.$46 per share. Less than 7 months later, in September, a consortium including Apollo, Brookfield and Sumitomo announced a $28 billion takeover of the company valued at $65 per share – this represents a >40% return in just over half a year and provides encouraging validation that our bottom-up fundamental analysis can identify attractively priced opportunities in the Real Assets arena, ahead of other major institutional players. For what it’s worth, we continue to see value in Air Lease and have engaged directly with the company to encourage them to explore whether there could be further upside to the bid price.

Air Lease share price in 2025

Source: Bloomberg, W1M. Data as at 23 September 2025

Value AND Growth

In investing parlance, investment opportunities are often bucketed into either Value or Growth. Value investments might not have the greatest fundamental operational backing but are trading at such discounts that investors can make a healthy return from a simple reversion to mean; Growth investments might not have the same discount but can grow their earnings or asset base from strong operational performance which should translate into share price performance.

Rather than wade into the Value versus Growth debate, I put it to you that the idea that these two are mutually exclusive is a false dichotomy and Real Assets are a perfect example.  Hopefully we’ve made clear the value we see in the Real Assets universe. However, what often goes unnoticed by investors are some of the secular growth themes that will drive demand for, and investment into, these assets over the next 10-20 years. We discuss a couple of examples below:

• Grid modernisation[3]: in the US the average age of the installed transmission network (the cables that transport electrons from source to use) is 40 years old with 25% of cables over 50 years old. Significant renewal of these transmission lines are required (up to 100,000 miles replaced by the end of the next decade) just to maintain the current state of the cables, let alone cope with the modern demands of intermittent renewable energy generation. US-based Quanta Services is an example of a holding which stands to benefit from this multi-year theme, providing infrastructure services, specialising in engineering, installation, maintenance and repair of network infrastructure.

[3] Source: https://www.oliverwyman.com/our-expertise/insights/2020/dec/energys-eleventh-hour/modernizing-aging-transmission.html           

• Power demand[4]: electricity demand continues to ramp up as the world moves away from fossil fuel energy sources towards electrified solutions such as electrified transport (e.g. electric vehicles). Electricity demand is expected to breach 29,000 terawatt-hours (TWh) in 2026 and grow twice as fast as total energy demand in the near term. A new source of demand is also coming from the proliferation of AI: data centres consumed 180 TWh of electricity in 2024 and this is expected to increase +130% by the end of the decade. Our investment in Cameco, one of the world’s largest producers of Uranium, is uniquely well positioned as nuclear energy (for which Uranium is the key fuel) becomes an ever more important part of the energy mix given its baseload power generation.

W1M real assets secular growth themes

Source: Company websites, W1M. Data as at 30 June 2025

Roadshow

Thank you for your time. As a reminder, the W1M Real Assets Fund forms a core building block of our Global, Active and Direct W1M MPS service. Many of the themes we discuss in this article form part of the ongoing W1M roadshow and if you wanted to join us for any of our remaining dates please do get in touch with your business development contact.

[4] Source: https://www.iea.org/reports/electricity-mid-year-update-2025/demand-global-electricity-use-to-grow-strongly-in-2025-and-2026?utm_source=chatgpt.com