CAIA Level I: An Introduction to Core Topics in Alternative Investments, 2nd Edition

CHAPTER 8

Land, Infrastructure, and Intangible Real Assets

This chapter discusses the major categories of institutional-quality investments in real assets other than real estate. Real assets are economic resources that directly generate consumption. This chapter begins with land, which leads naturally to timberland and farmland. The chapter finishes with discussion of two categories of real assets that have emerged relatively recently as substantial components of the alternative investments space for institutional investors: infrastructure and intellectual property. The material in this chapter lays a foundation for the discussion of real estate in Chapters 9 and 10.

8.1 LAND

Raw, undeveloped, or unimproved land is land that is not currently generating substantial scarce resources such as food, shelter, or recreation. The value of any such land must be attributable to the possibility or option that the land can be developed, improved, or otherwise transformed into being productive. The vast majority of land, by area, falls into the category of undeveloped and unimproved. In some jurisdictions, the title to land includes both the right to improvements on the land and to natural resources that are under the land. In other jurisdictions, rights to minerals and other natural resources under the land are titled separately.

8.1.1 Land in Anticipation of Development

A term for investment in and acquisition of undeveloped land or vacant lots is land banking. Land banking is the practice ...