This year represents the 250th Anniversary of the publication of Adam Smith’s An Inquiry into the Nature and Causes of the Wealth of Nations, and it’s still as redolent today as when it was published in 1776. At the time, the American Revolution was underway and the Declaration of American Independence would soon bring about the USA that we know today. For Britain, the industrial revolution was creating new trade routes as fast as it was losing its colonies in America.

Elsewhere, other nascent empires were coalescing to form more powerful states, from Mughal India and Ottoman Turkey to Romanov Russia and Qing China. Meanwhile the Dutch, French and Spanish all aligned with America to chip away at Britain’s expansionist desires.

But it was Smith’s book that really brought about what we now refer to as modern capitalist theory into relief. His treatise recognised banks as increased drivers of wealth and, more crucially, argued that individuals acting in their own self-interest promoted the best outcomes for society.

It’s this last point that relates to our analysis of what creates and safeguards a truly permanent hedge. In his publication, Smith was thinking empirically about the economic forces that matter in creating durable wealth. For him, it was the productive asset and labour of capitalism that created real value, rather than the rules imposed by governments or the monomania that gripped so many in relation to gold at the time (even more redolent given the recent price rises of the metal). Smith was placing an emphasis on the theories that worked, rather than those that were driven by hype.

Hedges come to the fore in moments of uncertainty and are often partnered by inflationary cycles, geopolitical instability or unexpected shifts in monetary policy. It’s the search for a hedge that can lead investors toward the new and unfamiliar, instead of sticking to the most durable sources of economic value.

Perhaps a more useful approach is to think like our man Smith, and ask “what actually preserves wealth over time?’’ Rather than chasing nebulous or abstract concepts, the task is to identify the underlying forces that create and safeguard real value.

It’s our view that the most reliable hedges tend to be rooted in the real economy. Assets that derive their value from productive activity, essential services or sheer scarcity often behave differently from purely financial instruments when markets become unstable.

Real estate and infrastructure provide a powerful hedge for many because they combine tangible assets with evident income generation. Property values and rental income often rise alongside inflation, particularly in sectors with structural demand such as logistics hubs, residential property (especially in supply-constrained cities) and more latterly, in specialised areas such as data centres.

Infrastructure investments, including those around energy networks, transport systems and digital connectivity, share similar characteristics. These assets can generate stable, long-term cash flows, which are also underpinned by regulatory frameworks. They make for compelling opportunities in these sectors that echo those approaches shown in private markets, where disciplined sourcing and structuring are as essential as performance.

These assets (also known as “hard assets’’) count gold and precious metals among their number, and are often found at the heart of inflationary cycles because they are the materials driving rising prices in the first place.

They have long been considered as “safe havens’’ during periods of currency debasement, geopolitical turbulence or dynamic financial stress. It is because of their scarcity and liquidity that allows them to maintain value even when confidence in financial systems is shaken.

Energy needs and industrial metals, such as those of oil, natural gas, copper and other resources found in the ground, tend to rise during those inflationary periods driven by supply shocks or gradual economic expansion. Similar behaviours can be seen in agricultural commodities such as wheat and corn, which may play a similar role when global food demand or climate volatility affects supply.

It’s why farmland often occupies a unique position. As a productive asset that’s tied to global food consumption, it combines income generation with tangible value, historically producing steady returns with lower volatility than those found in other commodity exposures.

These can also function as hedges when companies possess strong pricing power and resilient demand. Think Coca-Cola, Procter & Gamble, the National Grid and luxury brands such as Hermès.

The utilities, healthcare and consumer sectors tend to perform relatively well during economic downturns because they still provide the essential goods, services and products that are bought with regularity.

Commodity producers, including those companies in the mining and energy industries, often benefit directly from rising commodity prices. Meanwhile, the established “value” organisations mentioned above might often have strong cash flow and durable business models that can be more resilient than other growth-oriented firms during inflationary cycles.

While inflation can erode fixed income returns, there are certain financial instruments that are specifically designed to protect investors.

Treasury Inflation-Protected Securities (TIPS) and similar tools adjust principal values in line with inflation measures. This works by helping preserve purchasing power for other investments.

High-quality government bonds can also serve as defensive assets during periods of market stress. When risk assets such as stocks fall sharply, capital often flows toward sovereign debt, which has the effect of providing stability and liquidity as part of a diversified portfolio.

In terms of portfolios and beyond mere asset selection, resilience often depends on the tactical strategies employed to protect them. Derivatives such as options, futures and inverse exchange-traded funds can provide short-term protection against market declines or volatility. Used selectively, though, these tools still allow investors to hedge specific risks or manage exposure during periods of uncertainty.

More broadly, opportunities frequently arise in special situations, where distressed assets, recapitalisations or mispriced private market investments present as ventures, and where careful analysis can uncover values that are independent of market cycles.

A truly permanent hedge rarely comes from a single asset class. Instead, it emerges from disciplined allocation that spans across productive assets, resilient companies and carefully structured portfolio strategies.

For global family offices and sophisticated investors, finding these opportunities requires both the insight and access to private markets. Arbra's global network and expertise in asset management and wealth advisory allows us to guide clients trying to secure these opportunities, while helping them to construct portfolios that are designed not only for growth, but for resilience.

When markets are uncertain and the most effective hedges are, like Adam Smith’s view, often the least fashionable, assets that are not only selected with long-term discipline in mind, but also rooted in the real economy around us.