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Investors expected to ramp up allocation to real estate assets

George Sell Uploaded 02 November 2020 Global: Research from Aviva Investors shows that global institutional investors plan to increase their allocation to real assets, and particularly real estate assets.

Aviva polled more than 1,000 insurers and pension funds, which represent over €2 trillion (£1.8 trillion) of assets under management. It found that 49 per cent of insurers and 37 per cent of pension funds are expecting to increase their allocation to real assets investments strategies.

More than half (54 per cent) of insurers and 45 per cent of pension funds identified real estate long income as their preferred strategy. Insurers in particular highlighted their desire to increase their exposure to debt strategies, with 48 per cent planning to increase exposure to infrastructure debt, 46 per cent to real estate debt and 46 per cent to private corporate debt.

Of the pension funds, 39 per cent expected to increase their exposure to real estate debt, 39 per cent to private corporate debt and 37 per cent to infrastructure debt.

When asked what the biggest hurdle to real estate assets is, 46% of insurers said regulation and 41% of pension funds said illiquidity. Around 44% of insurers and 36% of pension funds see financial instability as the most likely concern for their investments over the next 12 months.

The investors surveyed broadly agreed that their own economies will take until the end of 2022 to the beginning of 2023 to recover to normal levels, with European investors the least optimistic (predicting spring or summer 2023), and those in north America the most optimistic, predicting June 2022.

Mark Versey, chief investment officer, real assets, at Aviva Investors, said: “Around 57 per cent of insurers and 53 per cent of pension funds surveyed feel that the long-term trend of working from home will provide the greatest opportunity for real assets investing."

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