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Investors to increase real assets exposure
04 March 2014
Rise expected over the next three years
The majority (60%) of European investors expect to see
institutional allocations to real assets increase over the next
three years, according to new research by Aquila Capital. Of
these, one in five (21%) expect the rise to be 'significant'
while only 7% expect institutions to reduce their
Almost half of institutional investors (44%) say they have more
than 10% exposure to real assets.
Stuart MacDonald, managing director, Aquila Capital, commented:
"This study underlines the extent to which real assets are
evolving into a mainstream asset class that will increasingly
feature in investor portfolios alongside other alternative
investments. Our own experience supports this trend as we are
seeing a continued rise in enquiries from investors in our real
While nearly half (44%) of investors say they have more than
10% exposure to real assets, more than four times as many
respondents are positive on the investment outlook for the
asset class (41%) compared with those who are negative
Property was ranked as the real asset type offering the
greatest investment opportunities over the next five years
(33%), followed by infrastructure (18%); commodities (15%);
farmland (15%) and renewable energy (15%).
Aquila's study identifies the key drivers behind institutions'
increasing appetite for real assets. These are long-term
positive cash flows (56%); protection against inflation (56%);
portfolio diversification thanks to modest correlation with
other asset classes (42%); continued need for attractive
risk/returns profile (27%); and growing familiarity with the
asset class due to existing allocations (17%).
There are a number of factors supporting the case for real
assets over coming decades, including the increasing global
population (55%), increasing standards of living, especially in
emerging markets (51%); out of date infrastructure in need of
modernisation (50%); increasing industrialisation and
urbanisation (44%); and long-term supply/demand imbalance
Aquila's findings are echoed by Towers Watson's latest Global
Pensions Asset Study, which reports an increase in exposure to
alternatives generally from 5% to 18% of portfolios over the 12
months to the end of 2013.
Research was carried out among 54 institutional investors based
in the UK and Europe between February 3 and 14 2014.