How AI's Physical Demands Are Reshaping Real Asset Investing

SPEAKER_1 (0:00)

Alex Berg, Senior Vice President, Head of ETF Sales, Cohen Steers. Welcome back to the program. We were talking about, you have different themes here, and what you're going on today. You bring us CSRA ETF. Tell us about that.

Alex Berg (0:15)

Yeah. So CSRA is the Cohen and Steers Real Assets Active ETF. This is designed to provide investors a one-ticker solution to a diversified and more importantly, actively managed solution for real assets. What we think about at Cohen and Steers are the core four with real assets. This is listed real estate securities, global listed infrastructure, natural resource equities, and commodities. I think the value proposition for CSRA has to do with the fact that investors who want to allocate to real assets, they may not want to allocate amongst the underlying sectors. This is going to be more of a streamlined balance solution to be able to utilize it within portfolios. I think this has a lot of threads into our market outlook right now.

SPEAKER_1 (1:05)

When I think about the portfolio construction that you're doing, you talked about different themes and how something like this can now look at.

We have inflation. You said things that will now work going forward for themes in the physical economy, for example, right?

Alex Berg (1:22)

Yep.

Yeah, so real assets are very much tied to the physical economy. And I mean, real assets in general, let's just take a step back. These are the physical hard structures and raw materials that make up the real economy. And there are aspects to them that are very much tied to high inflation and high inflation sensitivity. But beyond that, I think real assets are very much tied to a lot of key secular themes that your viewers are probably reading about in financial media every single day. So these include things like AI infrastructure build out, electrification, rising power demand, deglobalization and the impact on supply chains, resource scarcity, things like that. So it's not just an inflation story, there is a kind of current secular theme story and ample growth opportunities.

SPEAKER_1 (2:09)

Think about the evolution of ETFs. I know you and I were speaking in the break and saying how another record year for ETFs, but we think about the growth that we're seeing. You talked about growth, the next phase for to have differential exposure. That's this, is that right?

Alex Berg (2:25)

Yeah, absolutely. And you think about what's going on in the ETF space right now. I mean, we've seen 1.2 trillion through the end of Q2 going to ETFs. And no doubt, core portfolios are going to be built largely with passive exposures, but we're seeing investors start to explore a lot of active ETFs for specific things regarding outcome-oriented strategies, right? So whether this is looking for ways to diversify portfolios, manage risk, downside protection, generate income, protect against inflation, access specialized asset classes, this is where active ETFs can shine. And what's interesting is that you look at the flows year-to-date into active. They're occupying about 37 percent of all ETF flows in 2026 through the end of Q2.

I should remind your viewers that only six years ago or so, those numbers were well, well below 10 percent. So we're seeing this demand come really for the need for these outcome-oriented strategies. And investors wanted to access differentiated return streams.

SPEAKER_1 (3:28)

Right. They realized that with active investing, you can maybe get a better return and, you know, taking out some of the laggards or being a little more stringent. You mentioned AI, right? Let's go into that more too, because we have electrification, infrastructure, the power demand, the changing demographics, the supply chain. You mentioned that and some of the names that showed up the holdings within this particular ETF are not necessarily names people know, but you say they are correlated at least in some with AI.

Alex Berg (4:00)

Yeah. Yeah. I mean, if you think about AI at the application layer, it is very much digital, but underneath it is intensely physical. If you think about how AI is powered, you know, it needs massive amounts of energy. You know, data centers are a big part of the story that your viewers are probably reading about every single day, but it also has to do with cooling systems and transmission networks and cell towers and stuff like that. So we think very much today, the world is broadened out in terms of AI and it's very much a physical economy story tied around AI, but I don't want to limit the real asset story just to AI. I mean, there's a lot of really interesting things going on right now elsewhere, you know, having to do with, I mentioned, like deglobalization and resource scarcity and things of that nature.