Sovereign Investors Grasp the Real Asset Investment Paradigm

Should sovereign investors fear unsustainable fiscal deficits, or should they accept the reality and search for other assets, higher yield, more risk? Let’s take a step back, the U.S. credit rating was downgraded to AA+ by Standard and Poors, the Federal Reserve’s balance sheet has massively expanded since late 2007, the price of gold endures increases since the 2000s, and the U.S. fiscal deficit is ballooning. The massive growth of a central bank’s balance sheet is daunting and occurring not just in America. The expansion of issuing short term debt by a government or monetary authority will have a profound impact on money markets. In fact, politicians on Capitol Hill are trying to regulate money market funds with new rules.

In addition, to make matters more complicated the world population continues to grow at a fast pace, global productivity has stymied, and natural resource prices remain in appreciation mode. Sovereign investors are riding secular trends; this is why we see increased interest in real assets.[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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