Aviva Investors, the global asset management business of Aviva plc, this morning publishes its Aviva Investors’ 2020 Real Assets Survey report, the definitive story on real estate and infrastructure across Europe, following a global survey of more 1,000 insurance and pension fund investment decision-makers, representing £2 trillion in global assets under management.
It reveals that demand for real assets continues to grow, driven by enhanced returns, ESG and capital preservation. The majority of both insurers (77 per cent) and pension funds (64 per cent) agreed cashflow-matching was the most important requirement for their real assets strategy, followed by capital preservation. Both insurers and pension funds (54 per cent and 45 per cent respectively) identified real estate long income as the asset class most likely to support these requirements.
The effect of the Covid-19 pandemic is seen across the report: despite significant numbers of office workers set to work remotely for the foreseeable future, 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.
Reflecting the pace at which ESG integration across markets is maturing and the impact of Covid-19, the Study also reveals a continued increase in focus on social responsibility by real assets investors. Including healthcare assets in portfolios was a factor for 55 per cent of insurers and 45 per cent of pension funds; investments in social housing and education were also seen as important.
Asked when they expect their own economies to recover to 2019 levels, global institutional investors broadly agree on the end of 2022 or the beginning of 2023, with European investors the least optimistic by favouring spring or summer 2023 and those in North America at the other end of the spectrum, predicting June 2022.
Below are some additional highlights from the report :
· Regulation is the biggest hurdle to real assets allocation for insurers (46 per cent), whilst pension funds are most concerned about illiquidity (41 per cent);
· Pension funds lag behind insurers on net zero portfolio targets, with only 47 per cent having a commitment in place, and just 33 per cent aiming to achieve net zero by 2050. Conversely, 72 per cent of insurers have firm commitments in place, of which 44 per cent have committed to doing so by 2050;
· 44 per cent of insurers and 36 per cent of pension funds see financial instability as the most likely concern for their investments over the next 12 months.
Mark Versey, Chief Investment Officer, Real Assets, at Aviva Investors, said:
“The findings from the latest edition of our study reveal fascinating trends in the appetite for real assets from institutional investors. Cashflow-matching continues to be the key criteria for insurers and pension funds around the world, as these investors increasingly recognise the resilience that real assets can offer their portfolios. This is being seen not only through consistent – and often inflation-linked – cashflows, but also via enhanced yields relative to more traditional asset classes and lower volatility. With central banks looking set to keep base rates low for the foreseeable future, our expectation is that institutional investors will increasingly turn to real assets for yield, returns and diversification.”
Source : Company