Active ETFs in Real Assets: A New Era for Infrastructure and Income Strategies?

The traditional 60/40 portfolio-long the bedrock of institutional and retail asset allocation-has faced mounting scrutiny in 2025. Prolonged positive correlations between equities and bonds, driven by inflationary pressures and shifting monetary policy, have eroded its diversification benefits. Against this backdrop, active ETFs targeting real assets and preferred securities have emerged as compelling alternatives. Cohen & Steers, a leader in alternative income strategies, has introduced two such ETFs: the Infrastructure Opportunities Active ETF (CSIO) and the Short Duration Preferred and Income Active ETF (CSSD). These funds aim to redefine portfolio construction by leveraging active management, sector-specific expertise, and structural advantages in a macroeconomic environment where traditional allocations struggle.

The 60/40 Portfolio's Struggles and the Rise of Alternatives

The 60/40 model's effectiveness has waned as stock-bond correlations have remained positive for over 700 days by March 2025. This dynamic, exacerbated by central banks' inflation-fighting measures, has left investors seeking new tools to hedge against volatility and generate income. A 2025 CFA Institute report notes that the 60/40 portfolio's historical diversification benefits are no longer guaranteed, particularly in scenarios of simultaneous equity and bond sell-offs. Meanwhile, active ETFs-especially those focused on real assets and preferred securities-are gaining traction. Schwab Asset Management's 2025 study reveals that 63% of investors view active ETFs as potential outperformers, with 51% drawn to alternative strategies.

Cohen & Steers' CSIO and CSSD: Strategic Differentiation

Cohen & Steers' CSIO and CSSD ETFs are designed to exploit inefficiencies in niche markets while addressing the shortcomings of traditional portfolios.

• CSIO: Infrastructure as a Growth Engine
  The Infrastructure Opportunities Active ETF (CSIO) targets secular growth drivers such as rising power demand from artificial intelligence (AI) and data centers. By focusing on infrastructure companies, CSIO taps into sectors with inflation-resistant cash flows and long-duration assets. Cohen & Steers emphasizes its high-conviction, benchmark-unconstrained approach, allowing the fund to overweight undervalued infrastructure equities and underweight overvalued ones. This strategy aligns with broader macroeconomic trends: infrastructure equities and commodities have shown resilience in Q3 2025 amid sticky inflation and interest rate cuts.

• CSSD: Tax-Efficient Income in a High-Yield Environment
  The Short Duration Preferred and Income Active ETF (CSSD) addresses the demand for income generation in a low-yield world. By investing in investment-grade, institutional preferred securities, CSSD offers tax-efficient returns through qualified dividend income, which is taxed at lower rates than ordinary income. These securities also provide structural protections, such as fixed-income-like yields and equity-like upside potential, making them attractive in a rising interest rate environment. Cohen & Steers highlights that preferred securities have outperformed traditional fixed income in 2025, driven by their high yields and defensive characteristics.

Macroeconomic Tailwinds and Structural Advantages

The relevance of CSIO and CSSD is amplified by current macroeconomic conditions. Structurally higher inflation and interest rates, as outlined in MSCI's 2025 macro scenarios, challenge traditional portfolios by reducing the effectiveness of bonds as a diversifier. In such an environment, real assets and preferred securities offer dual benefits:
1. Inflation Protection: Infrastructure and commodities have historically outperformed during inflationary cycles due to their tangible, cash-generating assets.
2. Yield Superiority: Preferred securities, with their high current yields, provide a compelling alternative to bonds, which have seen yields rise but face duration risk.

Moreover, active management allows these ETFs to dynamically adjust to market shifts. For example, CSSD's short-duration focus mitigates interest rate risk, while CSIO's active sector rotation enables it to capitalize on emerging growth themes like renewable energy and AI-driven infrastructure.

Third-Party Validation and Investor Trends

The shift toward active ETFs is not merely a firm-specific narrative. Institutional investors and wealth managers are increasingly allocating to real assets and alternatives. A 2025 SSGA report notes that 60/20/20 portfolios (60% stocks, 20% bonds, 20% alternatives) are outperforming traditional 60/40 blends, with alternatives including infrastructure, private credit, and preferred securities. Similarly, Schwab's research highlights that registered investment advisors (RIAs) now hold 48.5% of active ETF assets, citing cost efficiency and tax benefits as key drivers.

Expert analyses further validate the efficacy of these strategies. A 2025 LPL Financial report argues that the 60/40 portfolio's relevance is diminishing, urging investors to explore alternatives like infrastructure and preferred securities for diversification and income. Meanwhile, MSCI's macro scenarios underscore the role of active ETFs in navigating structurally higher inflation and rates.

Conclusion: A Paradigm Shift in Portfolio Construction

Cohen & Steers' CSIO and CSSD ETFs exemplify a broader trend: the rethinking of traditional asset allocation in favor of active, sector-specific strategies. By targeting real assets and preferred securities, these ETFs address the limitations of the 60/40 model while offering structural advantages in a high-inflation, high-interest-rate environment. As investor demand for income, diversification, and growth-oriented alternatives continues to rise, active ETFs are poised to play a central role in the next era of portfolio construction.