Issue 26: 2014

Specialty Asset Management

The Year Ahead

Based on recent findings, here’s our outlook for nonfinancial assets.

Photograph by Andy Ryan

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This might just be a standout year for nonfinancial specialty assets. When you factor in the ongoing economic development in emerging markets, population growth and the correlating demands on energy and nondiscretionary resources, opportunities for growth in the investment category begin to emerge. Nonfinancial specialty assets are also notable because of both their unique investment nature and their continued importance as part of a well-diversified portfolio.

The bottom line. Nonfinancial assets have the distinct advantage of being independent of the general market and economic conditions that so strongly affect more traditional investments. The factors driving the value of these investments are unusual, making this an attractive asset class and an important consideration in the construction of a balanced portfolio. Direct investments in nonfinancial assets such as farm and ranch land, timberland and commercial real estate may be appropriate and effective diversifiers within a portfolio of financial assets. If you are considering a potential acquisition, diversification or sale, we hope our observations here give you a glimpse into our overall outlook for these specialty assets in 2014.

IMPORTANT INFORMATION

Investing involves risk. There is always the potential of losing money when you invest in securities.

Projections made may not come to pass due to market conditions and fluctuations.

Past performance is no guarantee of future results. Diversification does not ensure a profit or protect against loss in declining markets.

Always consult with your independent attorney, tax advisor, investment manager and insurance agent for final recommendations and before changing or implementing any financial, tax or estate planning strategy.

OTHER IMPORTANT INFORMATION

Equities
Equity securities are subject to stock market fluctuations that occur in response to economic and business developments.

International Investing
International investing involves special risks, including foreign taxation, currency risks, risks associated with possible differences in financial standards, and other risks associated with future political and economic developments. Investing in emerging markets may involve greater risks than investing in more developed countries. In addition, concentration of investments in a single region may result in greater volatility.

Commodities
Trading in commodities, such as gold, is speculative and can be extremely volatile. There are special risks associated with an investment in commodities, including market price fluctuations, regulatory changes, interest-rate changes, credit risk, economic changes and the impact of adverse political or financial factors. Tangible assets can fluctuate with supply and demand, such as commodities, which are liquid investments, unlike most other tangible investments.

Energy and natural resources stocks have been volatile. They may be affected by rising interest rates and inflation, and can also be affected by factors such as natural events (for example, earthquakes or fires) and international politics.

Other
Nonfinancial assets, such as closely held businesses, real estate, oil, gas and mineral properties, and timber, farm and ranch land, are complex in nature and involve risks, including total loss of value. Special risk considerations include natural events (for example, earthquakes or fires), complex tax considerations and lack of liquidity. Nonfinancial assets are not suitable for all investors.

Technology stocks may be more volatile than stocks in other sectors.

This might just be a standout year for nonfinancial specialty assets. When you factor in the ongoing economic development in emerging markets, population growth and the correlating demands on energy and nondiscretionary resources, opportunities for growth in the investment category begin to emerge. Nonfinancial specialty assets are also notable because of both their unique investment nature and their continued importance as part of a well-diversified portfolio.

 

The bottom line. Nonfinancial assets have the distinct advantage of being independent of the general market and economic conditions that so strongly aff ect more traditional investments. The factors driving the value of these investments are unusual, making this an attractive asset class and an important consideration in the construction of a balanced portfolio. Direct investments in nonfinancial assets such as farm and ranch land, timberland and commercial real estate may be appropriate and eff ective diversifiers within a portfolio of financial assets. If you are considering a potential acquisition, diversification or sale, we hope our observations here give you a glimpse into our overall outlook for these specialty assets in 2014.