A new ETF is taking a big bet on real estate and other tangible assets.
CBRE Investment Management launched the IQ CBRE Real Assets ETF in May with the idea that it will provide protection against inflation in a rising interest rate environment.
“The ETF market is starved of options in this space,” ETF portfolio manager Dan Foley told CNBC’s “ETF Edge” on Thursday. “There are a lot of opportunities here with secular changes in things like digital transformation, decarbonization and then, frankly, mispricing in the marketplace.”
Foley noted that global financial institutions are already in the space and said he thinks retail investors should be too.
“This has been one of the best positioned segments of the real asset universe,” Foley said. “The valuations are very compelling… [The] the elements are in place for a fairly strong overall performance going forward.”
CBRE’s new ETF is hitting the market as enthusiasm for AI and tech companies dominate Wall Street.
Foley said hard assets, in general, are an important diversifier away from technology, particularly hot AI stocks. Furthermore, he noted that tangible assets are crucial to enabling a digital economy in the first place.
“Data centers, cell towers, enabling decarbonization — you need these leading infrastructure companies to make that investment. It’s driving growth that we think will drive a differentiated result,” he said.
According to issuer New York Life Investments, the fund’s main holdings are in real estate and utilities. include public storage, crown castle, Nextera Energy and Equinix (EQIX), which is considered a leader in data centers.
Equinix shares are up 7% over the past month.
“Equinix is a great example of a world-leading entity,” Foley said. “That’s the type of asset you want. These are essential to the new economy.”
Since the IQ CBRE Real Assets ETF launched on May 10, it is down nearly 6%.