Real Assets

How Diversified Real Assets Perform Amid Market Volatility

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Jul 20, 2022

Average performance during Quarters of market volatility

Worried about possible market volatility? In our view, a diversified real asset portfolio that includes exposure to private infrastructure and real estate has the potential to perform relatively well during volatile periods. During the 14 quarters between 2003 and 2021 when the VIX Index’s measure of market volatility rose above 35, broad equities lost 3.85% on average, while a diversified real asset index blend of real estate and infrastructure fell only 1.9%. During the same time period, the diversified real asset portfolio also experienced fewer fluctuations in performance than global equities, outperforming global equities with a smoother ride. We attribute this outperformance to a number of factors, including that private markets are largely insulated from public market shocks.

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This material is not, and is not intended as investment advice, an indication of trading intent or holdings or the prediction of investment performance. All information is current as of the date of this material. Views and information expressed herein are subject to change at any time. Brookfield Public Securities Group LLC disclaims any responsibility to update such views and/or information. This information is deemed to be from reliable sources however, Brookfield Public Securities Group LLC does not warrant its completeness or accuracy. This presentation is not intended to, and does not constitute an offer or solicitation to sell or a solicitation of an offer to buy any security, product, investment advice or service (nor shall any security, product, investment advice or service be offered or sold) in any jurisdiction in which Brookfield Public Securities Group LLC is not licensed to conduct business, and/or an offer, solicitation, purchase or sale would be unavailable or unlawful. Indexes are unmanaged and are not available for direct investment. Investing entails risks, including possible loss of principal. Past performance is no guarantee of future results.

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Index Provider Disclosures

The quoted indexes within this publication are unmanaged and cannot be purchased directly by investors. Index performance is shown for illustrative purposes only and does not predict or depict the performance of any investment. There may be material factors relevant to any such comparison, such as differences in volatility and regulatory and legal restrictions between the indexes shown and any investment in a Brookfield strategy, composite or fund. Brookfield obtained all index data from third-party index sponsors and believes the data to be accurate; however, Brookfield makes no representation regarding its accuracy. Indexes are unmanaged and cannot be purchased directly by investors. Brookfield does not own or participate in the construction or day-to-day management of the indexes referenced in this document. The index information provided is for your information only and does not imply or predict that a Brookfield product will achieve similar results. This information is subject to change without notice. The indexes referenced in this document do not reflect any fees, expenses, sales charges or taxes. It is not possible to invest directly in an index. The index sponsors permit use of their indexes and related data on an “as is” basis, make no warranties regarding same, do not guarantee the suitability, quality, accuracy, timeliness and/or completeness of their index or any data included in, related to or derived therefrom, and assume no liability in connection with the use of the foregoing. The index sponsors have no liability for any direct, indirect, special, incidental, punitive, consequential or other damages (including loss of profits). The index sponsors do not sponsor, endorse or recommend Brookfield or any of its products or services. Unless otherwise noted, all indexes are total return indexes.

Index Definitions

The Cambridge Associates Real Estate Index is an end-to-end calculation based on data compiled from real estate funds, (including opportunistic and value-added real estate funds) including fully liquidated partnerships, formed beginning in 1986.

The Cambridge Associates Infrastructure Index represents a horizon calculation based on data compiled from infrastructure funds, including fully liquidated partnerships, formed beginning in 1993.

The CBOE Volatility Index (VIX Index) is a key measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices.

The Dow Jones Brookfield Global Infrastructure Index is calculated and maintained by S&P Dow Jones Indices and comprises infrastructure companies with at least 70% of their annual cash flows derived from owning and operating infrastructure assets, excluding Master Limited Partnerships. Brookfield has no direct role in the day-to-day management of any Brookfield-branded indexes.

The FTSE Global Core Infrastructure 50/50 Index gives participants an industry-defined interpretation of infrastructure and adjusts the exposure to certain infrastructure sub-sectors. The constituent weights are adjusted as part of the semi-annual review according to three broad industry sectors - 50% Utilities, 30% Transportation including capping of 7.5% for railroads/railways and a 20% mix of other sectors including pipelines, satellites and telecommunication towers. Company weights within each group are adjusted in proportion to their investable market capitalization.

The FTSE EPRA Nareit Developed Index is an unmanaged market-capitalization-weighted total-return index, which consists of publicly traded equity REITs and listed property companies from developed markets.

The ICE BofA Preferred Stock REITs 7% Constrained Index is a subset of the ICE BofA Fixed-Rate Preferred Securities Index including all real estate investment trust-issued preferred securities, but caps issuer exposure at 7%.

The ICE BofA USD High Yield and Corporate Custom Index is a custom index blend of sectors of ICE BofA US High Yield Index (70%) and ICE BofA US Corporate Index (30%) that correspond to equity sectors in Brookfield's real asset universe. Such real-asset-related sectors include Cable, Infrastructure Services, Oil Gas T&D, Telecommunications, Transportation, Utilities, Agriculture, Timber, Basic Materials, Energy Exploration & Production, Metals & Mining, Real Estate, RE Ownership & Development and REITs. The ICE BofA US High Yield Index tracks the performance of U.S.-dollar-denominated below-investment-grade corporate debt publicly issued in the U.S. domestic market. The ICE BofA US Corporate Index tracks the performance of U.S.-dollar-denominated investment-grade corporate debt publicly issued in the U.S. domestic market.

The MSCI World Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets.

The S&P Developed Market REIT Index serves as a comprehensive benchmark of publicly traded equity REITS domiciled in developed markets.