Real assets have maintained a strong appeal to institutional investors through the global pandemic, a new survey carried out by Aviva Investors shows.
A poll of more than 1,000 insurers and pension funds with more than €2trn in assets under management, revealed asset classes such as infrastructure, real estate and private debt have retained their appeal through this crisis - even though fundamental changes are affecting them.
In fact, many subsets of this sector are more popular than mainstream asset classes such as equities, fixed income and cash, the study shows.
European pension funds were particularly keen on real estate debt (34%) and infrastructure equity (34%), while real estate long income (28%) and infrastructure debt (32%) were also popular.
In contrast, just 21% of European investors said they intended to invest more into fixed income, and 11% said the same for equities.
Changing times
Through the Covid-19 pandemic and the lockdowns enforced by governments around the world, many companies have demonstrated they can continue to operate at, or close to, full capacity despite most of their employees working from home.
This raises questions over whether there will ever be a full return to the traditional office environment.
There are other fundamental questions over the future of real assets investing, too. How will airports and international travel bounce back from a near-global shutdown? Will city centres recover, or will we retreat to the suburbs? And what are the implications for infrastructure investment as governments turn on the spending taps to stimulate their economies?
These themes shaped the questions put to the 532 insurance companies and 535 pension funds from around the globe polled during July 2020, in one of the first comprehensive assessments of investor sentiment during the pandemic.
Investors voiced optimism about the resilience of real assets and concern about the economic impact of social distancing.
They were also intrigued by the long-term potential of an increase in working from home - potentially through the requirement for expanded and enhanced digital infrastructure to maintain this trend. Data centre and logistics growth and change are seen as having great potential. Asian investors are the most excited about the possibilities in this space, the study shows.
The study sheds light on a renewed interest in the social aspect of the environmental, social and governance (ESG) agenda. While the environmental agenda has maintained its prominence, the social element came to the forefront as communities around the world have rallied around key workers and the vulnerable.
Healthcare assets were the most popular social infrastructure investments among European pension funds, with 43% citing it as particularly important to the portfolio. This was followed by education and social housing (both 39%).
European insurers have similar priorities, although they are also keen on community assets and sustainable transport.
Download to read the full report here.
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Except where stated as otherwise, the source of all information is Aviva Investors Global Services Limited (AIGSL). Unless stated otherwise any views and opinions are those of Aviva Investors. They should not be viewed as indicating any guarantee of return from an investment managed by Aviva Investors nor as advice of any nature. Information contained herein has been obtained from sources believed to be reliable, but has not been independently verified by Aviva Investors and is not guaranteed to be accurate. Past performance is not a guide to the future. The value of an investment and any income from it may go down as well as up and the investor may not get back the original amount invested. Nothing in this material, including any references to specific securities, assets classes and financial markets is intended to or should be construed as advice or recommendations of any nature. This material is not a recommendation to sell or purchase any investment.
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144029 - 31/10/2021
