Investment In Real Assets Research Articles

The performance of renewable energy infrastructure

PurposeRenewable energy infrastructure is an important asset class in the context of reducing global carbon emissions going forward. This includes solar power, wind farms, hydro, battery storage and hydrogen. This paper examines the risk-adjusted performance and diversification benefits of listed renewable energy infrastructure globally over Q1:2009–Q4:2022 to examine the role of renewable energy infrastructure in a global infrastructure portfolio and in a global mixed-asset portfolio. The performance of renewable energy infrastructure is compared with the other major infrastructure sectors and other major asset classes. The strategic investment implications for institutional investors and renewable energy infrastructure in their portfolios going forward are also highlighted. This includes identifying effective pathways for renewable energy infrastructure exposure by institutional investors.Design/methodology/approachUsing quarterly total returns, the risk-adjusted performance and portfolio diversification benefits of global listed renewable energy infrastructure over Q1:2009–Q4:2022 is assessed. Asset allocation diagrams are used to assess the role of renewable energy infrastructure in a global infrastructure portfolio and in a global mixed-asset portfolio.FindingsListed renewable energy infrastructure was seen to underperform the other infrastructure sectors and other major asset classes over 2009–2022. While delivering portfolio diversification benefits, no renewable energy infrastructure was seen in the optimal infrastructure portfolio or mixed-asset portfolio. More impressive performance characteristics were seen by nonlisted infrastructure funds over this period. Practical reasons for these results are provided as well as effective pathways going forward are identified for the fuller inclusion of renewable energy infrastructure in institutional investor portfolios.Practical implicationsInstitutional investors have an important role in supporting reduced global carbon emissions via their investment mandates and asset allocations. Renewable energy infrastructure will be a key asset to assist in the delivery of this important agenda for a greener economy and addressing global warming. Based on this performance analysis, effective pathways are identified for institutional investors of different size assets under management (AUM) to access renewable energy infrastructure. This will see institutional investors embracing critical investment issues as well as environmental and social issues in their investment strategies going forward.Originality/valueThis paper is the first published empirical research analysis on the performance of renewable energy infrastructure at a global level. This research enables empirically validated, more informed and practical decision-making by institutional investors in the renewable energy infrastructure space. The ultimate aim of this paper is to articulate the potential strategic role of renewable energy infrastructure as an important infrastructure sector in the institutional real asset investment space and to identify effective pathways to achieve this renewable energy infrastructure exposure, as institutional investors focus on the strategic issues in reducing global carbon emissions in the context of increased global warming.

TRASFORMATION OF UKRAINE'S FINANCIAL ASSETS AMID THE DEVELOPMENT OF THE INTERNATIONAL FINANCIAL SYSTEM

The work has analysed the state of financial assets and their dynamics in the international financial system, considering the global changes in the financial architecture and financial relationships observed over the last decade. It has been observed that in 2020, global financial assets exceeded world GDP more than 18 times and consisted of three main equivalent components: assets of the real sector of the economy, assets of the financial sector, and assets of the financial sphere. The study has revealed that investment in intangible assets has slowed over the past two decades while investment in real assets, particularly in real estate, has become more active. Regularities in the relationship between the decrease in interest rates, the growth rate of GDP, and the directions of investment of funds in the leading countries of the world have been followed. This provides a basis for conclusions regarding further changes in the structure of global financial assets. The article has also raised issues of feasibility and riskiness of further increasing the amount of debt capital on a global scale in the context of some revision of its impact on the world economy after the 2008 crisis. Integration processes in Ukraine prompt the analysis of trends in the formation of financial assets in our country, with indicators similar to those of developed countries and global indicators in general. A comparison of global trends and indicators of the development of Ukraine's financial assets has highlighted significant differences both in percentages of GDP and in their structure; in particular, attention has been paid to the uneven development of various sectors of the financial market of Ukraine — the significant development of the banking sector along with the laggards of the stock market. This indicates an important gap in the development of the Ukrainian financial sector and the need to reform it to integrate into the global economic space.

Timing Sustainable Engagement in Real Asset Investments

Timing Sustainable Engagement in Real Asset Investments

Timing Sustainable Engagement in Real Asset Investments

Timing Sustainable Engagement in Real Asset Investments

Risk tolerance assessment in real assets investments: a scale validation in Brazil

Purpose – Risk tolerance, understood as the willingness of accepting a certain amount of risk which was perceived in an uncertain scenario, has been broadly studied under the framework of personal financial. This research aims to validate a scale for investment risk tolerance when dealing with real assets, in a business context. Design/methodology/approach – A survey was performed with 150 managers, directors, and entrepreneurs who make investment decisions regarding real assets in the commerce, industry, and service sectors. Exploratory factorial analysis was performed was applied to detect the dimensionality of Risk Tolerance construct. Findings – Risk Tolerance in real assets investments is a construct composed by two dimensions, the first factor is related to the familiarity of the decision-maker with the company and its investments, and it was denominated comfort and security, following the original dimension from personal finance research. The second dimension refers to the unpredictability and the complexity of risky investments in real assets, and it was denominated ‘black box effect’. The last factor, however, did not achieve the standards of reliability and it need further research.

Vieses Comportamentais e a Tomada de Decisão em Empreendedores e Gestores

ABSTRACT Objective: the present research aims to understand the role of behavioral biases present in the investment decision in entrepreneurs and managers, in the light of the behavioral finance. Theoretical approach: Considering that non-financial aspects influence the decision making of investments in real assets, the present research focuses on how individual characteristics, notably behavioral biases, can affect these investment decisions, from the perspective of Behavioral Finance. Method: a qualitative research was developed. Interviews were held with eight managers or entrepreneurs who usually make investment decisions in real assets within their organizations. Interviews were transcribed and content analysis was used to analyze the data. Results: findings suggest the presence of behavioral biases in the decision-making presented by the interviewees, specifically the optimism and overconfidence, loss aversion, self-attribution, sunk cost, endowment effect, regret, conservatism, and external agent effect. Optimism, overconfidence, and loss aversion were present in all the interviewees’ speeches. Regret and external agent effect emerged in entrepreneurs’ speech while conservatism bias emerged in the speech of managers. Conclusions: entrepreneurs and managers indistinctly presented behavioral biases; however, the triggers for those biases are diverse. When it refers to insecurity in deciding, entrepreneurs allow themselves to question their own decision-making ability, by either regret or consulting an external agent, while managers hold themselves in conservative decisions.

Antecedents and Consequences of Psychological Aspects of Investors in the Real Asset Sector Towards Investment Decision Making

Purpose: This research is pursued at several points objectiveness: 1). Does the behavior of financial decision making on financial asset investors also apply the same to real asset investors. 2). By the empirically, this study is to test and confirm the relationship of herding and overconfidence factors to the level of loss aversion, regret aversion, financial literacy in making real asset investment decisions.
 Methodology: Involved 105 real estate auction investors as samples at the State Assets and Auction Service Office (KPKNL) Sidoarjo, East Java, Indonesia. Collecting data using a questionnaire consisting of 23 questions for measurement the variabel. Testing research data passes several feasibility tests, such as Inner and outer test modelling by PLS and hypothesis test to see the magnitude of the coefficient of relationship
 Result and Findings: Loss and regret aversion variables through direct and intervening testing have a positive and significant effect, but financial literacy variables, both through direct and intervening testing, are stated to have no significant effect. There are different aspects of the psychology of investment decision making between investors in the financial sector and investors in the real asset sector. The most striking difference is the consideration of information, opportunities and real assets turnover which will be resold after winning the auction.

Over Confidence, Mental Accounting, and Loss Aversion In Investment Decision

The psychology related to investment cannot be ignored by individuals who want to get investment returns. Investment decisions are the most important decisions in decision making. This investment decision is a policy carried out by investors to invest in one or more assets to get more profits in the future. Overconfidence investors prefer higher risk returns to be more important than those overestimated in terms of their knowledge and lower than expected. Mental accounting considers the costs and benefits of loss avoidance decisions made by investors to protect themselves against losses. This study discusses financial problems related to community investment decisions, special investments in real assets and financial assets. The data used are 250 respondents' data on Indonesian investors who invest in Indonesian capital markets. The results showed that overconfidence and mental accounting significantly affected investors' investment decisions in the Indonesian capital market.

PERSONAL BUSINESS ASSETS AND THEIR USE

The article collects analytical information about the nature and characteristics of profitable use of personal business assets. There are a number of options for earning extra income outside of job spend and outside of your regular job. The article defines the concept and outlined types of personal business assets, considers examples and ways to use them, pays attention to the peculiarities of investing in personal assets for profit. Personal business assets are personally owned resources that can potentially generate income. The significant difference between income from job and income from personal assets is that the personal asset brings income with minimal or even no direct labour participation of the owner of the asset. Personal business assets are essentially the same resources that can perform some function to generate cash income. Personal cash savings that are kept at home are not a personal business asset. This money, in addition to not generating income, also reduces its value almost daily due to inflation. From a business point of view, the concept of assets and liabilities is fundamental to achieving financial well-being. The article uses the ideas and suggestions of the American businessman Robert Toru Kiyosaki because he is considered one of the modern well-known theorists on business assets. Almost everything can be a personal business asset: movable and immovable property that can be rented for other people; enterprise as a passive business; internet sites that generate revenue from conversions; securities, deposit accounts that generate income in the form of interest; licenses and intellectual property rights under which the owner receives payments for use (royalties) or sells the license in full; receiving income from foreign exchange transactions in the Forex market. Investments in real assets can serve as a way to save equity. Most often, investments are made in gold or real estate, which will save money from inflation for a long time and can bring in rental income, as well as collectibles, but here it is important to know in this area and understand how profitable the investment is.

Facing the Digital Revolution Era with Development of Real Asset Investment Products for Sharia Bank Customers

Facing the Digital Revolution Era with Development of Real Asset Investment Products for Sharia Bank Customers

A global investment opportunity in non-listed infrastructure for institutional investors

PurposeInfrastructure investment is one of the few high-calibre real alternative assets with a strong prominence in the portfolios of institutional investors, especially those with a liability-driven investment strategy. This has seen increased institutional investor interest in infrastructure for reasons such as diversification benefits and inflation hedging abilities, resulting in the substantial growth in non-listed and listed investment products offering access to the infrastructure asset class, and complementing the existing route via direct investment. This paper aims to assess the investment attributes of non-listed infrastructure over Q3:2008–Q2:2019, compared with other global listed assets of infrastructure, property, stocks and bonds.Design/methodology/approachQuarterly total returns were derived from the valuation-based MSCI global non-listed quarterly infrastructure asset index over Q2:2008–Q:2019, which were then filtered to decrease the valuation smoothing effects. A similar set of returns data was also collected for the other global asset classes. The average annual return, annual risk, risk-adjusted performance and portfolio diversification benefits for non-listed infrastructure and other asset investment classes were then computed and compared. Lastly, a constrained optimal asset allocation analysis was performed to validate the performance enhancement role of global non-listed infrastructure in a mixed-asset investment framework.FindingsGlobal non-listed infrastructure delivered the strongest average annual total return performance, outperforming the other asset classes and provided investors with total returns that linked strongly with inflation. Global non-listed infrastructure also provided investors with one of the least volatile investment returns because of its ability to ensure predictable total returns delivery. This means that on the Sharpe ratio risk-adjusted return basis, non-listed infrastructure was also the strongest performing asset. This performance was also delivered with significant portfolio diversification benefits with all assets, resulting in non-listed infrastructure contributing to the mixed-asset portfolios across the entire portfolio risk spectrum.Practical implicationsAside from better risk-return trade-offs, institutional investors are getting more secular with their portfolios for alternative assets that are able to provide other investment benefits such as predictable long-term performance and inflation-linked returns. A further improvement in performance and diversification benefits could be achieved by enriching existing investment portfolios with real alternative assets, one of which is the infrastructure asset class. For institutional investors, having exposure to and being part of the development, delivery and management of infrastructure assets are important, as they are one of the few real assets having considerable significance in the context of society, economy and investment needs.Originality/valueThis is the first research paper that empirically investigates the investment attributes of the non-listed infrastructure at a global level. This research enables empirically validated, more informed and practical decision-making by institutional investors in the infrastructure asset class, especially via the non-listed pathway. The ultimate aim of this paper is to empirically validate the strategic role of non-listed infrastructure as an important alternative asset in the institutional real asset investment space, as well as in the overall portfolio context.

Financial soundness of single versus dual banking system: explaining the role of Islamic banks

This paper empirically investigates the financial stability of the countries having both Islamic and conventional banks versus the countries having only conventional banks. It also examines the ability of Islamic banks to provide stability to the overall financial system. The analysis is carried out for a sample of 416 banks drawn from 39 countries over the period 1995–2014. The results provide sound evidence that the dual banking system is more stable than the single banking system. Higher stability is attributed to the presence of Islamic banks in the dual banking system. Furthermore, when only the dual banking system is investigated, the results strongly confirm the greater stability of Islamic banks as compared to their conventional counterparts. Although Islamic banks are mimicking conventional banking practices, their increased interactions with the real economy, investments in real assets, non-aggressive lending profile, and limited exposures to speculative activities make them more resilient and protected.

Ways of development and formation of islamic banking in modern economy

The article describes the origin and development of banks. The differences between the traditional and banks are compiled. In 1985, the concept of banks was proposed, based on the same principle of profit and loss participation. The key point was to promote the idea of an financial institution as, first of all, an investment institution. Modern law differs significantly from traditional law in its form, content, and relationship to positive legislation. In modern legal systems, Muslim law is relatively rare in the traditional form of doctrine, which remains its leading source in a few countries and only about certain branches. The document was developed to create alternative financing opportunities and meet the growing needs of the population and entrepreneurs, expanding the range of banking and financial services offered, and mobilizing resources from domestic and foreign markets based on the principles of banking and Finance. banks are financial commercial organizations that attract deposits from the population and entrepreneurs and place them on investments by the principles of Sharia for profit. These include both balanced banks and separate divisions of traditional banks that provide certain services using various financing methods, called Islamic Windows. Unlike traditional banks, banks place much fewer resources in securities. At the same time, the securities permitted by Sharia (sukuk) have their characteristics. They must be associated with a specific asset. Owners of such securities do not have a fixed income but share risks with the Issuer. The return on these securities is related to the return on investment in real assets.

Performance of Shari’ah based Investment: Evidence from Pakistani Listed Firms

The investment universe of Shariah Compliant (SC) equities is relatively smaller compared to the investment universe of Non-Shari’ah Complaint (NSC) equities due to the imposition of Shari’ah specific filters. Therefore, under the diversification theory, it is argued that portfolios constructed by using SC equities are sub-optimal. To empirically test this notion, the main purpose of this study is to investigate that either the SC portfolios (faith bound investors) forego some part of returns or hedged against market risks while fulfilling their religious obligations. To test the foregoing, we imply simple asset pricing techniques which are in vogue in conventional finance. Firstly, we segregate the firms listed at Pakistan Stock Exchange (PSX) into SC and NSC stocks. Then, we form two portfolios within each group based on market capitalization and volatility. The purpose is to analyze and compare the performance of these two groups while controlling for firms related characteristics such as size and volatility. The data coverage is from January 2004 until June 2016. Our results indicate that in most of the cases the risk-adjusted returns (alphas) for the returns differential between SC and NCS firms are positive. This is mainly because the SC firms in comparison to their counterparts in PSX, provides excess returns that are hedged against market, size and value based systematic risks factors. Overall, these results reconcile with one prevailing notion that the SC stocks that have lower financial leverage and higher investment in real assets are lesser exposed to market risks. Further, the SC firms that are more capitalized and lesser volatile, perform better than lower capitalized and higher volatile SC and NSC firms. To sum up our results, we do not find any substantial evidence for opportunity loss due to limited diversification opportunities in case of SC firms. This paper highlights that Islamic funds have potential to fulfill the demands of risk averse investors who are also faith bound.

Strategic flexibilities: valuation of a company with the application of the Real Options Theory

Goal: In this paper, a binomial model is proposed to evaluate the option of deferring an investment and expanding the operational scale of a forest-based company that will perform the de-duplication of Pinus sp. and will market packaging for storage and transportation of vegetables.
 Design/Methodology/Approach: The proposed model measured the options of deferring an investment and expanding the operational scale of the forest-based company. In this perspective, the model of evaluation used was the binomial model in discrete time using the Real Options.
 Results: It was observed that the inclusion of management flexibilities in the decision making process has added value to the investment project; therefore, the project of investments in real assets proved to be economically feasible.
 Limitations of the investigation: The studies that address the corporate finance framework based on real data are a restrictive factor, due to the lack of collaboration of companies, that is, the availability of information that is usually classified.
 Practical implications: The study was based on the real data of a company; therefore, it can be adopted as a stimulus to the Real Options approach to the decision making of entrepreneurs or researchers.
 Originality/value: The focus of the study was to contemplate the managerial flexibilities of an industry of the secondary sector of the Brazilian economy, which performs the unfolding of wood, demonstrating the innovation of the technique approach used in this market segment.

INTERNAL CREDIT RATING FRAMEWORK FOR REAL ASSET INVESTMENT

Real asset investment, which is assumed to be worthier than traditional assets in regards to exposure to income volatility, has become central to investment portfolios in financial institutions. However, the features of illiquidity and uniqueness involved in an individual real asset deal require private investors to review the full dimensions associated with the transaction structure. Banks and global credit rating agencies assess the quality of products by relying heavily on qualitative research executed by human insights and experiences. Such an approach ensures the comprehensiveness of the review process but it requires excessive resources in time and money. This study presents an internal rating system that instantly screens features of a deal proposal and provides a rating compatible with the global rating standard. The result shows that the outcomes created by this model are mostly clustered from BBB to BB. These findings match the average ratings for real assets, as determined by global rating agencies, which strengthens the practicality of the proposed model.

Money and the Measurement of Total Factor Productivity

Firms have greatly increased their cash holdings since the mid-1990s. These holdings have an opportunity cost; i.e., allocating firm financial capital into monetary deposits means that investment in real assets is reduced. Traditional measures of Total Factor Productivity (TFP) do not take into account these holdings of monetary assets. Given the recent large increases in these holdings in the U.S. and other advanced economies, it is expected that adding these monetary assets to the list of traditional sources of capital services will reduce the TFP of the business sector. We measure this effect for the U.S. corporate and non-corporate business sectors.

Business orientation, efficiency, and credit quality across business cycle: Islamic versus conventional banking. Are there any lessons for Europe and Baltic States?

ABSTRACTThis paper empirically investigates the difference between Islamic and conventional banks in terms of business dynamics, cost structure, credit quality, and stability. It also examines the difference in the response of two types of banks during peak and trough phases of the business cycle. The analysis is carried out for a sample of 280 banks in 20 countries over the 1995–2014 period. The results reveal that Islamic banks are more involved in fee-based business, are less cost-efficient, have higher credit quality, and have higher capitalization than conventional banks. We also find that Islamic banks outperformed conventional banks with regard to their credit quality and stability indicators during the trough phase of the business cycle. The improved performance seems to be due to the differences in the provisioning strategies of the two types of banks, the non-aggressive lending profile of Islamic banks, and investment in real assets. Finally, based on the empirical findings, the paper also highlights potential lessons that conventional banks in Baltic States, which were severely hit by the 2007–2008 global financial crisis, can draw from Islamic banking principles.

КРИТЕРИАЛЬНЫЙ ПОДХОД ДЛЯ ОЦЕНКИ РЕЗУЛЬТАТОВ ИНВЕСТИЦИОННОЙ ДЕЯТЕЛЬНОСТИ В ПАРАДИГМЕ ЭКОНОМИЧЕСКОГО РОСТА

In the industrial economy, intensive development is characterized by an increase in the efficiency of investments in real assets that save the most expensive resources - labor and capital. In the process of investing resources should be used efficiently. In this case, the result will be intensive economic growth. Profits must grow faster than investments, the growth of which must outpace the growth of labor costs. Extensive development is characterized at best by a proportional increase in these indicators, or by a slower increase in profits compared to an increase in the cost of resources. If each next resource unit brings less profit, then resources are used inefficiently. Changes in profits, investments and labor costs can be estimated based on the calculation of indices of these indicators. For the economy as a whole, the ratio of indices of statistical reporting indicators for the respective years is analyzed. The efficiency criteria have been developed to evaluate the resource use in investment activity - a tool that makes it possible to evaluate the results of investment activity on the basis of information available in the public domain. Depending on the value of these criteria, the type of growth of the Russian economy was analyzed. The ratios of the indices of macroeconomic indicators of the Russian Federation for 2010-2017, in accordance with the proposed criteria, indicate the extensive economic growth. To assess the effectiveness of the use of resources of the enterprise, the ratios of indices of indicators of financial statements for the respective years were studied: profit from sales, residual value of fixed assets and labor costs. Decrease in the main indicators of financial statements of First Container Terminal JSC occurs with the least risk, the gross profit decreases the slowest. The growth of Vostochnaya Stevedoring Company LLC is mainly mixed, which in 2017 became completely extensive.

Interbank Networks and Backdoor Bailouts: Benefiting from Other Banks’ Government Guarantees

This paper explains why banks derive a benefit from being highly interconnected. We show that when banks are protected by government guarantees, they can significantly increase their expected returns by channeling funds through the interbank market before these funds are invested in real assets. If banks that are protected by implicit or explicit government guarantees act as intermediaries between other banks and real investments, there is the possibility that these intermediary banks will be rescued by their governments if the real assets fail. This additional hedge increases the likelihood that banks and their creditors are repaid relative to a direct investment in those same real assets. We show that this incentive to exploit the government guarantees of other banks leads to long intermediation chains and a degree of interconnectedness that is above the welfare-optimal level, which justifies regulatory intervention. This paper was accepted by Amit Seru, finance.