The booming U.S. energy market, robust housing recovery and strengthening economy are creating growth opportunities for investors of non-financial specialty assets, including farmland, timberland, real estate, private businesses, and oil and gas, according to U.S. Trust. In a report published today on its 2014 outlook for non-financial assets, U.S. Trust’s Specialty Asset Management group said it expects strong performance from the asset class and that it is a market poised for long-term growth.
“When you factor in long-term market trends – population growth, economic development in emerging markets and the correlating demands on energy, food and housing – we see a strong growth opportunity emerging for non-financial assets,” said Dennis Moon, national executive of U.S. Trust’s Specialty Asset Management group that manage separate accounts for high net worth investors in real assets.
“Furthermore, the factors that drive the value of these assets are unique and independent of the volatile forces often at play in the broader market, making these investments highly attractive and an important consideration in the construction of a balanced portfolio.”
In its outlook for 2014, U.S. Trust takes an in-depth look at the opportunities for five key non-financial asset categories:
Timberland: Demand for timber is expected to grow as the U.S. housing recovery moves into high gear and competition for resources heats up between pulp and paper mills and renewable energy plants fueling the fast-growing woody biomass market. Timber pricing is rebounding from historic lows and will likely continue to rise as supplies tighten and demand accelerates. These market fundamentals, combined with low return volatility and tax efficiency, suggests a strong 2014 for timberland investments.
Farm and ranch land: With a 4 percent, or in some cases higher, cash yield expected in 2014, farmland remains a favorable investment opportunity. In 2014, farm and ranch land prices are expected to level off as more normal slow growth is anticipated for commodities including corn, soybeans and wheat, spurred by macro-trends such as global population growth. As farmer-investors become more conservative and land prices level off, more opportunities for farmland deals are expected to emerge for long-term investors.
Oil and gas properties: As demand for energy accelerates and the U.S. moves ever closer to energy independence, oil and gas investment activities will continue to be a big area of focus. With the apparent worldwide economic improvement, in conjunction with the transforming energy efficiencies and correlating demands, the stage is set for investment opportunities in energy over the long term.
Commercial real estate: Economic improvements in 2013, both domestic and abroad, translated into stronger demand in the U.S. commercial real estate market, with the office, retail, multi-family and industrial segments all posting improvements for the year in vacancy, rents and valuation. The outlook remains positive overall for commercial real estate investors in 2014; however, there will be variances by product type and market. In the year ahead, multi-housing rent growth is expected to moderate and vacancy rates may slightly rise. Office and industrial properties are seeing continued rent growth but also shifts in tenant preferences for more functional space and amenities. Renovation will likely be the dominant focus of investments in retail properties as many markets continue to deal with “dead centers.”
Private businesses: As an investment class, private businesses are expected to offer a breadth of opportunities both for domestic and foreign acquirers in the year ahead, along with an increase in the inventory for buyers and the number of interested sellers. Positive balance sheet growth should continue to strengthen in 2014, and business owners are benefitting from strong credit opportunities at favorable rates, which should spur M&A activity. However, the pace of private company investment activity may be slowed as business owners face the still unknown impact of the Affordable Care Act on their cost of doing business.
“Non-financial assets can be an effective diversifier to a portfolio of financial assets, and we’re seeing this asset class become an increasing focus for many of our clients, both individual and institutional investors with access to the amount of capital needed for direct investments1,” added Moon. “By their nature, these are unique investments, and the assets themselves need to be managed to maximize the value of the deal and the investment’s income-producing potential.”
The Specialty Asset Management team at U.S. Trust offers strategic insight and specialized experience required to manage and maximize the potential of these investments. Led by Dennis Moon, the executive team includes:
Doug Donnell, national Timberland executive.
John Taylor, national Farm and Ranch executive.
Dick Sadler, national Oil and Gas executive.
Andrew Tanner, national Private Business and Real Estate Services executive.
A copy of U.S. Trust’s 2014 Outlook on non-financial assets is available at www.ustrust.com/sam along with additional whitepapers from the specialty asset management group at U.S. Trust.
1Note: Oil, gas and mineral interests are not available for direct investment through U.S. Trust.
U.S. Trust
U.S. Trust, Bank of America Private Wealth Management is a leading private wealth management organization providing vast resources and customized solutions to help meet clients’ wealth structuring, investment management, banking and credit needs. Clients are served by teams of experienced advisors offering a range of financial services, including investment management, financial and succession planning, philanthropic and specialty asset management, family office services, custom credit solutions, financial administration and family trust stewardship.
U.S. Trust is part of the Global Wealth and Investment Management unit of Bank of America, N.A., which is a global leader in wealth management, private banking and retail brokerage. U.S. Trust employs more than 4,000 professionals and maintains 140 offices in 32 states.
As part of Bank of America, U.S. Trust can provide access to a broad range of banking solutions for individuals and businesses, and an extensive retail banking platform.
Bank of America
Bank of America is one of the world’s largest financial institutions, serving individual consumers, small- and middle-market businesses and large corporations with a full range of banking, investing, asset management and other financial and risk management products and services. The company provides unmatched convenience in the United States, serving approximately 50 million consumer and small business relationships with approximately 5,100 retail banking offices and approximately 16,300 ATMs and award-winning online banking with 30 million active users and more than 14 million mobile users. Bank of America is among the world’s leading wealth management companies and is a global leader in corporate and investment banking and trading across a broad range of asset classes, serving corporations, governments, institutions and individuals around the world. Bank of America offers industry-leading support to approximately 3 million small business owners through a suite of innovative, easy-to-use online products and services. The company serves clients through operations in more than 40 countries. Bank of America Corporation stock (NYSE: BAC) is listed on the New York Stock Exchange.
Non-financial 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. 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.
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.
Diversification does not ensure a profit or protect against loss in declining markets.
U.S. Trust operates through Bank of America, N.A., and other subsidiaries of Bank of America Corporation. Bank of America, N.A., Member FDIC.
This news is courtesy of www.bankofamerica.com
4 Responses to “Demand for Energy, Food and Housing Creates Opportunity for Investors, Says U.S. Trust in 2014 Outlook on Non-financial Assets”
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March 17th, 2014 at 8:23 pm
If realize there is a global awakening happening. Investors would be able to capitalize on the growing trend in the economy. There is a growing trend of foreign investors for the united states. After a dismal crash during 2007-09, real estate had improved to a large extent in major markets by mid-2012 and on into early 2013. Home prices have rebounded dramatically from the depths of the recent recession, but in many markets they remain below their 2006-2007 peaks. By mid 2013, more than a few observers were concerned that another housing bubble was developing. Meanwhile, real estate enjoyed a significant boom in China, Canada, Australia and a few other select spots during much of 2010 through 2012.
A few comments about recent real estate market history can help to explain the current market: During most of the 2001–07 period, easy availability of development loans and mortgages, low interest rates, eager investors and unbridled optimism caused massive new developments of homes, shopping centers and office buildings to sprout on a global basis. The effect was widespread. For example, large portions of the economies of Ireland and Spain were driven by real estate speculation and investment. China, Australia and India saw significant real estate booms, as did Dubai. By 2007, however, the global boom in real estate was unwinding, and in many cases markets were crashing. Many commercial projects failed to attract a sufficient number of new tenants. “Subprime” mortgages issued to home buyers with poor credit and little income plummeted in value, particularly in the U.S. and Europe, and what began as a real estate crash unleashed a global financial nightmare and a daunting recession. Many of the resulting problems have largely been resolved, in some cases through massive bankruptcies of mortgage firms, developers, banks and construction companies, as well as the bankruptcies or foreclosures suffered by home owners and property investors.
Over the long term on a global basis, there will be continuing demand from the health care sector for new or remodeled properties as the percentage of the population over age 65 continues to grow, boosting demand for medical care and assisted living centers. Another growing trend in construction in major economies is to incorporate a higher number of energy conservation technologies in new buildings. This is true in both residential and commercial construction. Several “green” building certification plans are now in place, so that architects and builders may seek to attain certain energy conservation and eco-friendly standards.
March 17th, 2014 at 8:40 pm
The growth of generation Y and its impact on all sectors of
commercial real estate could be the singular most dominant
trend for many years. This group lives, works, and plays in different
ways than previous generations. The impact will be felt by
all real estate sectors. This generation will be more urban and
less suburban; they won’t want to drive as much but will wantto be mobile. From intown rental housing to collaborative office
space to close-in warehousing to ensure same-day delivery
from online retailers, gen Y will be a noticeable force in shaping
commercial real estate. All of these trends will have a significant
impact on real estate. Referred to as a “‘powerful engine” by an
investor, this generation “will be very good for real estate.”
On the other side of the demographic shift, the baby boomers
also will drive change as they age; many will sell their homes
and move to urban locations with similar amenities as those
desired by gen Y (but with the added amenity of convenient health care).
March 18th, 2014 at 1:17 am
While this is creating opportunities for the investors it can create yet some other problems for the economy…As global demand rises, inflation will rear it’s head. Of course with demand, employment will be on the rise, but with the inflation factor, who really benefits here?…And apart from that, these non-financial assets are very volatile at best, so even the investors are vulnerable.
March 18th, 2014 at 12:02 pm
The Shale revolution is one of the key factors in this economic growth..Not only will investors benefit but consumers will also gain…