Investors expect good returns from real assets this year, especially in real estate equity and infrastructure, according to Aviva Investors’ Real Assets Study 2024.
Aviva Investors' poll of global institutions found expectations for returns improving across all asset classes. However, the future path of inflation and interest rates continues to cast a shadow of uncertainty over long-term return projections.
Return expectations for infrastructure investments, both debt and equity, have risen significantly. This trend likely reflects the global need for infrastructure development, as well as the push for climate change solutions.
Positive outlook rests on recovery
Investors are optimistic on the return outlook for real assets across global regions, but North American respondents tend to be more positive across asset classes and timeframes. This upbeat view hinges on expectations of market resilience and a robust recovery in the real estate market.
Real estate equity and infrastructure equity, as well as real estate long income (RELI), see the steepest rises in investors' return expectations over the coming years. Real estate assets are starting from a lower baseline, with one-year return expectations at 3.2% for real estate equities and 2.9% for RELI.
Inflation clouds long-term view
However, the unclear path of inflation and interest rates is casting a shadow over the longer-term outlook for debt. Most forms of debt, including private corporate debt, are expected to deliver solid returns over one year, while investors are less certain on returns over three and five years.
Looking ahead five years, a clear divide emerges between regions in terms of return expectations. North American investors anticipate stronger returns across most asset classes, while their Asian counterparts project returns below the global average. European expectations hover around the global average. This regional gap is particularly pronounced for real estate.
While one-year return expectations are scattered across asset classes, a clearer trend emerges for three and five-year return horizons, especially among the top-performing asset classes. Return expectations for real estate equity, though scattered for the one-year period, show regional convergence over three and five years.
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