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 500 insurance and pension fund investment decision-makers, representing £600 billion in global assets under management.
It reveals that investor demand for real assets continues to grow despite macro and political concerns, despitea challenging political and economic environment, attracted by the diversification on offer and potential illiquidity premium over public markets.
The findings also emphasised the increasing importance investors place on environmental, social and governance (ESG) issues and the desire to demonstratethat real assets have a broader benefit than financial returns. Nine in 10 respondents said they consider ESG to be important in investment decision making.
Both insurers (44%) and pension funds (38%) said escalating trade wars were a concern to their real asset investments over the next 12 months, whilst the continued lack of clarity over the future relationship between the UK and the European Union was also a concern.
Below are some of the key highlights from the report.
· 43% insurers and 40% pension funds raised fears that ‘regulatory interference’ was proving challenging to investment activities. Both groups (37% of insurers and 30% of pension funds) cited the lack of regulatory harmony across Europe as a concern
· 49% of insurers and 45% of pension funds perceive ‘financial instability’ as the most likely and concerning event for real asset investment over the next 12 months
· 30% of insurers and 26% of pension funds believe ‘difficulty finding suitable opportunities’ is the biggest barrier to investing in real assets or increasing existing allocations
Commenting on the findings, Mark Versey, CIO of Avia Investors Real Assets, said:
“Strong appetite for Real Assets is unsurprising given the continued global backdrop of political and economic uncertainty. As well as offering investors cashflow-matching characteristics and added diversification, returns for the sector have been dependable and buoyed by the illiquidity premia they can offer.
“The growing influence of ESG is another undeniable trend, however the lack of readily-available information can create difficulties in quantifying the ESG credentials of a project . This makes integration complex and something that must be undertaken on a case-by-case basis.
“The boundary between infrastructure, real estate, and private debt is increasingly blurred. Investors are looking for multi-asset portfolios with an outcome-oriented focus, whether that be growth, long income, or predictable, inflation-matching cashflows. New entrants and rising allocations from existing investors increase the risk of overcrowding and of returns being squeezed in well-trodden areas of the market. Investors need to consider this when building strategies to ensure they achieve the best possible outcomes.”
Source : Company