In an effort to provide investors with greater diversification, Prudential Investments has launched the Prudential Real Assets Fund, which will invest in real estate, metals, fuel and other commodities. In addition, the fund aims to protect investors against inflation and rising interest rates.
According to research, real assets outperform stocks and bonds during periods of rising interest rates. Ibbotson Associates found that when the Federal Research raised interest rates from 1% in June 2004 to 5.25% in June 2006, stocks rose 4.56% a year, bonds lost 0.34% but real asset rose 9.35%.
“This fund offers investors the potential to lower their overall risk while enhancing the potential for better returns,” said Prudential Investments President Judy Rice. “Along with providing a potential hedge against rising interest rates and inflation, this fund helps improve portfolio diversification since the performance of real assets is not tied to traditional stock and bond investments.”
The fund’s dynamic asset allocation strategy will be managed by Quantitative Management Associates, while Prudential will oversee the asset classes themselves.