Which of the following best describes real assets in portfolio management?

Real assets refer to physical or tangible assets that have intrinsic value due to their substance and properties. This category primarily encompasses items such as real estate, commodities, land, and infrastructure. These assets are valued for their ability to generate cash flows, provide utility, and serve as a hedge against inflation, as their value tends to increase in line with rising prices.

In portfolio management, investing in real assets can offer diversification benefits, as they often behave differently from traditional financial assets like stocks and bonds. They also carry specific risks and considerations, such as market demand, physical depreciation, and location-related factors.

The other choices describe different types of investments but do not align with the definition of real assets. Liquid investments refer to financial assets that can be quickly converted to cash, while derivatives and financial instruments are financial assets rather than physical items. Foreign currencies, although they hold value, do not possess the tangible characteristics that define real assets. Therefore, the best description of real assets in portfolio management is the inclusion of physical or tangible assets like real estate.