Real Asset Appetite Soars | Chief Investment Officer

(June 16, 2014) – Investors are keener than ever on infrastructure and real estate, according to a major global survey by CREATE-research.

In the group’s sixth annual survey of pension investors, asset managers, and distributors, author Professor Amin Rajan found that appetite for real assets was “far higher now than in any of our previous surveys.

“In the last year, notably, the biggest property deals—involving premier trophy assets in London, New York, Tokyo, Sydney, and Zurich—were snapped up by pension plans and sovereign wealth funds,” Rajan wrote.

“While advancing in their run-oﬀ phase, pension plans are moving from an asset-based diversification to one based on liability matching. In it, both real estate and infrastructure feature high in the early stage.”

Two-thirds of respondents said real estate and infrastructure were likely to play an important role in their asset allocation in the next three years.

The report’s findings echo recent moves to dedicate more cash to these asset classes, including Norway’s sovereign wealth fund and the Church of England’s investment fund which have both pledged to put more money into infrastructure.

Meanwhile, Professor Rajan also found a declining appetite for emerging markets, with as many respondents seeing the asset class as an “opportunistic” or tactical play as those making a longer-term allocation towards it.

Nick Lyster, European CEO of Principal Global Investors, which sponsored the research, said institutional investors had been left “disappointed” by returns from emerging markets in the past few years.

“There is a growing scepticism about the emerging markets story. After the crash thought at least they would get growth from emerging markets, but that has been very disappointing in the past three years,” he said.

“Emerging markets were mostly driven by the success of China in the past 15 years—all countries went up in the China tide. In the past few years that tide has been going down and some markets are going to struggle.”

Professor Rajan questioned more than 700 pension schemes, sovereign wealth funds, asset managers, and distributors from 30 countries. You can access the report here.