CONTRIBUTORS
Andrew Chambers
Portfolio Manager
Key takeaways
- In a persistently inflationary environment, resilient and growing income is critical to long-term total returns.
- Listed Real Assets offer attractive income characteristics, supported by inflation linked pricing power, essential-use demand and cash flows that can grow over time.
- Diversifying across Real Asset sectors, geographies and business models can help reduce income volatility and mitigate “income shocks.”
- Structural tailwinds such as population growth, electrification and data demand, support the outlook for sustainable, inflation-aware income growth.
Income that endures
Inflation remains a defining feature of the current investment environment. Australia’s latest CPI data showed that headline inflation rose 4.6% in the 12-months to March 2026, with the CPI rising 1.1% in March alone1.
For income focussed investors such as retirees, we believe that income should always be the major driver of total returns over a cycle. In an environment of persistent inflation and the elevated rate uncertainty, dividend sustainability and dividend growth matters as much as ever in that equation.
The key challenge for these income-focussed investors is not just finding high yield; it is finding income that can remain resilient across the cycle and grow over time to preserve real purchasing power without taking uncompensated risk. To us, this means investing in companies with fundamental income strength, not just a high spot yield but companies where revenue and income can grow faster when inflation increases, balance sheets and hedging that can mitigate higher funding costs, and business models with less cyclical demand.
Listed Real Assets, such as property, infrastructure and utilities, score well on these points due to their strong pricing power, essential-use demand, and contractual or regulated cash flows that can reprice through the cycle. Many operate under inflation linked regulated frameworks, have CPI-linked contracts, or user-pays models that allow cash flows to reprice over time, and offer essential services.
Diversification that delivers
Diversifying the sources of income (across sub-sectors, geographies and business models) can reduce the risk of “income shocks” when a single theme or asset-type faces pressure.
Listed Real Assets are not a single sector. Alongside the more traditional property, infrastructure and utilities names, they also include businesses that own long-life, essential-use assets such as transport corridors, logistics real estate, high-quality retail precincts, regulated networks and increasingly, digital infrastructure and increased electrification.
The common thread is that many of these Real Assets have mechanisms that can support inflation-linked or inflation-aware cash flows over time, helping to diversify portfolio income and potentially support income growth through inflation. A number of Real Assets (particularly tollroads and some retail landlords) actually have inflation plus or “higher of”mechanisms which can see cashflow growth permanently improve from even temporary spikes in inflation.
Another important consideration is that population growth and urbanisation increase baseline demand for all types of essential services, providing higher utilisation, stronger tenant demand, and greater ability to capture price growth over time. Population growth, alongside energy demand and data growth, are secular megatrends that underpin our diversified Real Asset portfolio holdings.
Opportunities in focus
We see many sectors and stocks within our Australian listed Real Asset universe (and selective global developed markets) as well-positioned to help support recurring cash flows through a range of economic outcomes. Some examples are listed below:
- Mobility and freight: the arteries of the economy:
User-pays infrastructure and freight networks can offer resilient, long-life exposure where cash flows can reprice through volume, tariffs and contract structures linked to inflation, with stocks such as Transurban Group, Aurizon Holdings and Atlas Arteria well positioned to benefit.
- Essential precincts and selected property exposures:
High-quality retail precincts and daily-needs real estate can benefit from population growth and entrenched consumer needs. In many cases, leases include structured rent reviews (fixed, CPI-linked and/or market reviews), and when replacement costs rise, leasing spreads can improve as landlords seek to recover higher construction and fit-out costs through higher rents. Examples include Scentre Group, Vicinity Centres and HomeCo Daily Needs REIT.
- Digital infrastructure:
The data economy needs physical assets. Data centres, fibre and critical communications infrastructure provide the physical backbone exposure of the digital economy and support its rapid growth. As such, data growth is a real-asset story.
With strong demand and high build-cost inflation, rent levels and leasing spreads can improve in parts of the market, particularly where new supply is constrained by power availability, land, and development lead times. Digital Realty (United States) and Chorus (New Zealand, dual listed on the ASX) offer strong leverage to this.
- Energy infrastructure and utilities:
Energy demand is evolving, not disappearing. Electrification, network investment, reliability requirements and the transition build-out are transforming what was once a low-growth sector into a more dynamic, inflation-leveraged growth opportunity.
Essential-use energy networks and integrated utilities can provide defensive cash flows, particularly where balance sheets and regulatory/contract settings are supportive. In the right circumstances, inflation can support revenue resets (through regulated asset bases or contracted escalators) and help underpin dividend growth. Examples include APA Group, AGL Energy and Contact Energy, Meridian Energy, Genesis Energy (New Zealand, both dual listed on the ASX).
Conclusion
Inflation persistence and policy uncertainty can reward portfolios that combine diversification with rents or pricing structures that grow faster with elevated inflation. Listed Real Assets can provide differentiated cash-flow drivers, and, when selected and constructed thoughtfully, an attractive foundation for income that can grow through inflation over time.
The ClearBridge Real Income Fund (and its ASX-listed active ETF, R3AL) is designed around these principles, aiming to reduce income concentration and mitigate income shocks while growing the dollar value of income over time.
Endnotes:
- Australian Bureau of Statistics (ABS), “Consumer Price Index, Australia,” Price Indexes and Inflation statistics release, accessed 8 May 2026, https://www.abs.gov.au/statistics/economy/price-indexes-and-inflation/consumer-price-index-australia/latest-release
Important Information
Franklin Templeton Australia Limited (ABN 76 004 835 849) is part of Franklin Resources, Inc., and holds an Australian Financial Services Licence (AFSL No. 240827) issued pursuant to the Corporations Act 2001. The ClearBridge Australian Equities Investment Team, a division of Franklin Templeton Australia Limited, is operationally integrated under the “ClearBridge Investments” global brand, alongside ClearBridge Investments, LLC (“CBI”), and other ClearBridge entities indirectly wholly owned by Franklin Resources, Inc. Distribution of this material is issued and approved in Australia by Franklin Templeton Australia Limited.
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The views expressed are opinions of the portfolio managers as of the date of this document and are subject to change based on market and other conditions and may differ from other portfolio managers or of the firm as a whole. These opinions are not intended to be a forecast of future events, research, a guarantee of future results or investment advice.
Some of the information provided in this document has been compiled using data from a representative account. This account has been chosen on the basis it is an existing account managed by the investment team, within the strategy referred to in this document. Representative accounts for each strategy have been chosen on the basis that they are the longest running account for the strategy. This data has been provided as an illustration only, the figures should not be relied upon as an indication of future performance. The data provided for this account may be different to other accounts following the same strategy. The information should not be considered as comprehensive and additional information and disclosure should be sought.
The information provided should not be considered a recommendation to purchase or sell any particular strategy / fund / security. It should not be assumed that any of the securities discussed here were or will prove to be profitable. It is not known whether the stocks mentioned will feature in any future portfolios managed by the investment team. Any stock examples will represent a small part of a portfolio and are used purely to demonstrate our investment style.
Risk warnings - Investors should also be aware of the following risk factors which may be applicable to the strategy shown in this document.
- Investing in foreign markets introduces a risk where adverse movements in currency exchange rates could result in a decrease in the value of your investment.
- This strategy may hold a limited number of investments. If one of these investments falls in value this can have a greater impact on the strategy’s value than if it held a larger number of investments.
- Smaller companies may be riskier and their shares may be less liquid than larger companies, meaning that their share price may be more volatile.
- Income strategy charges are deducted from capital. Because of this, the level of income may be higher but the growth potential of the capital value of the investment may be reduced.
Franklin Templeton Australia Limited as Responsible Entity has appointed the ClearBridge Australian Equities Investment Team, a division of Franklin Templeton Australia, as the fund manager for the ClearBridge Real Income Fund (ARSN 146 910 349, APIR SSB0026AU).
Effective 22 September 2025, the Martin Currie Real Income Fund was renamed ClearBridge Real Income Fund. The fund’s investment manager continues to be Franklin Templeton Australia Limited. On 30 September 2025, the fund’s investment management team was renamed to ClearBridge Australian Equities Investment Team. The team continues to be employed as a division of Franklin Templeton Australia Limited.
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