Real assets and exchange-traded funds. Both are all the rage among investors across the spectrum, but do they belong in the same discussion? Despite the inherent challenges — some might even say inadequacies — of various real asset ETFs, they are increasingly finding a place in wealth managers' strategies for real asset investment. In some cases, there are really no better choices to gain exposure to some of the underlying assets.

Prateek Mehrota, chief investment officer at ETF Model Solutions, a firm that creates ETF-based model portfolios, says that equities and fixed income are simply not sufficient to build a well-diversified investment portfolio. Investors need to include that “third bucket” of alternative investments which includes real assets. “We feel strongly that this third bucket is necessary,” he says. “With the proliferation of ETFs, we can now build a totally liquid real asset allocation. It's a huge deal.”

Investors across the s