In an era marked by economic uncertainty and shifting market dynamics, the traditional 60/40 equity-bond allocation is proving insufficient for long-term wealth preservation.

Investors are increasingly seeking strategies that can withstand volatility and deliver consistent returns over decades.

This is where the perpetual portfolio emerges as a revolutionary approach, built on the foundation of real assets to create an enduring financial legacy.

By shifting towards a balanced one-third equity, one-third bonds, and one-third real assets split, you can achieve greater stability and resilience.

Real assets, such as real estate, infrastructure, and commodities, offer tangible value that transcends market fluctuations.

They provide a robust hedge against inflation and economic downturns, making them ideal for a long-term, evergreen strategy.

This article will guide you through the benefits, practical allocations, and accessible structures to build your own perpetual portfolio.

The Unmatched Benefits of Real Assets

Real assets deliver a suite of advantages that enhance portfolio performance in ways traditional investments cannot.

First and foremost, they offer powerful inflation protection by tying income and value to real-world economic growth.

For instance, rental income from properties and contracted cashflows from infrastructure often rise with inflation, preserving purchasing power.

Additionally, real assets provide low correlation to public markets, reducing overall portfolio volatility and smoothing returns over time.

This diversification is crucial for minimizing drawdowns during market stress, as seen in historical data.

Moreover, they generate stable and reliable income streams through dividends, rents, or other cashflows, supporting long-term financial goals.

To summarize, the core benefits include:

• Inflation hedging with assets that appreciate in value during rising price environments.
• Diversification that lowers portfolio risk through non-correlated returns.
• Income generation from consistent cashflows, ideal for retirement or perpetual wealth.
• An illiquidity premium offering higher returns for longer lock-up periods.
• Tax efficiency through deductions and structures like non-traded REITs.

These advantages make real assets a cornerstone for any investor aiming for sustainable growth.

Historical Evidence: Why Real Assets Outperform

Data from the past decades clearly demonstrates the superiority of incorporating real assets into a portfolio.

During the low-inflation era from 1992 to 2022, traditional strategies thrived, but recent volatility has exposed their limitations.

In contrast, portfolios with real assets have shown enhanced risk-adjusted returns and better downside protection.

For example, adding 10-20% real assets to a 60/40 portfolio boosts returns while cutting volatility significantly.

This table illustrates the comparative performance metrics, highlighting the efficiency gains:

These figures underscore that a balanced allocation to real assets can transform your investment outcomes.

By adopting this approach, you align with strategies used by successful institutions like Canadian pensions and European endowments.

Their higher exposure to real assets has consistently delivered superior Sharpe ratios and long-term growth.

Building Your Perpetual Portfolio: Practical Allocation

To implement this strategy, start by dividing the one-third real assets portion equally between real estate and infrastructure.

This means allocating approximately 16-17% to each category, with a small portion for real assets credit.

Real estate should focus on income-producing properties like multifamily or industrial sectors, which are sensitive to inflation.

Infrastructure investments, such as regulated utilities or transportation projects, offer contracted cashflows with inflation linkage.

Here is a breakdown of recommended allocations to ensure broad exposure:

• Real estate: Target ~8.0% in private core or core-plus strategies for stable returns with moderate risk.
• Infrastructure: Allocate ~8.0% to private infrastructure for low equity correlation and reliable income.
• Real assets credit: Include ~2.0% in senior secured debt for additional diversification and downside protection.

Geographic diversification is also key, as different regions offer unique opportunities and risk profiles.

For instance, Canadian pensions have 22% exposure, primarily in real estate and infrastructure, showcasing its effectiveness.

By blending these elements, you create a portfolio that adapts to economic cycles and secures perpetual wealth.

Accessible Structures for Everyday Investors

Gaining exposure to real assets is no longer limited to large institutions, thanks to innovative perpetual structures.

Evergreen or perpetual funds, such as non-traded REITs, provide open-end access without maturity dates.

These vehicles enable continuous investing and flexibility to capitalize on market shifts over time.

They offer benefits like lower minimum investments, transparency, and evolved liquidity options.

Consider these accessible options to integrate real assets into your portfolio seamlessly:

• Non-traded REITs: Ideal for perpetual private real estate, with 90% of taxable income distributed as dividends.
• Open-end funds: Provide core exposure with the ability to reinvest dividends and navigate corrections.
• Global platforms: Reduce fees through scale and offer diversified solutions across geographies and sub-sectors.

These structures democratize access to high-quality real asset investments, making perpetual portfolios achievable for all.

By leveraging them, you can build a resilient financial foundation that grows steadily without constant rebalancing.

Navigating Risks and Implementation Steps

While real assets offer numerous benefits, it's essential to acknowledge and manage associated risks.

Key challenges include illiquidity, exposure to economic cycles, and alignment with your risk tolerance.

However, with careful planning, these can be mitigated to enhance long-term success.

Start by assessing your current holdings and resetting them to include core real asset sectors.

Use multi-manager platforms to diversify across strategies and reduce single-point failures.

Follow these steps to implement your perpetual portfolio effectively:

• Evaluate your financial goals and risk profile to determine the right real assets mix.
• Diversify across geographies and sub-sectors, such as residential real estate or renewable infrastructure.
• Monitor market conditions, like REIT discounts to NAV, to exploit buying opportunities during corrections.
• Rebalance periodically to maintain the one-third allocation, ensuring it aligns with perpetual objectives.
• Seek professional advice if needed, especially for complex structures like perpetual funds.

This approach ensures that your portfolio remains adaptive and resilient over decades, weathering any economic storm.

By embracing real assets, you join a growing movement of investors prioritizing sustainability and growth.

The perpetual portfolio is not just an investment strategy; it's a pathway to lasting financial security and legacy building.