Source: Financial Times, 22nd October 2011

The ongoing drive to increase the diversification of investment portfolios has led investors to cut their exposure to equities and load up on alternative assets such as commodities, real estate and infrastructure.

But are investors missing a trick? Could they get just as much diversification – and enjoy better liquidity and inflation protection and potentially stronger returns – simply by buying baskets of equities exposed to other asset classes?

A paper  by Xiaowei Kang, director of global research at S&P Indices, suggests that, for long-term investors at least, the answer could be yes.

“Real asset-based equities offer fundamental exposure to underlying real assets such as commodities, real estate and infrastructure,” says Mr Kang. “Investors who may be seeking a real asset allocation need not be handcuffed by traditional asset class boundaries.”