Institutional investors worldwide are set to increase their allocation to alternative assets – especially real assets like real estate – by about 2 percent to 3 percent in the next two years, according to a recent AMP Capital study.
Of the 60 surveyed global investors, which collectively managed a total of $1.9 trillion, one third anticipated increasing their allocation to alternatives in 2013, with “listed and unlisted real estate and infrastructure making up one of the fastest growing segments,” according to the study.
Of real asset alternatives, real estate was by far the most popular, with 72 percent of respondents saying they were most likely to increase allocations to it. The next most sought after asset class was infrastructure, with 56 percent of respondents interested in increasing allocations to it and 28 percent selecting infrastructure debt.
Direct or unlisted investments also became a target, with almost 40 percent of surveyed investors having set plans to increase their allocation to them. These investments, especially real estate, are mostly “bond substitution” – with bond yields remaining low, investors are looking for alternatives to replace them in their portfolios with higher returning assets – according to AMP Capital international chief executive and head of global clients Anthony Fasso.
In its research, AMP discovered that institutional investors are beginning to look at all the different parts of the real estate investment universe, including private real estate, listed REITs and investments in real estate debt, Fasso told PERE. As the cash flows of investors increase, they will be chasing both income and liquidity from their alternative assets, he said.
Real estate was the most popular asset class among Asian investors, of which 100 percent cited a strong focus on the asset class. With unlisted real estate funds largely undeveloped in the region, however, most are focused on listed real estate, and Fasso said it may be some time before there is a shift to private equity real estate funds.
“Their portfolios have been advised to follow a traditional investment strategy,” Fasso explained. He added that investors will most likely start increasing allocation to alternatives close to their home markets before they try to go global.
AMP Capital has A$130 billion (€93 billion; $122 million) in assets under management across all asset classes. The firm’s most recent fund, AMP Capital Retail Trust, closed last year on A$1.2 billion, with large commitments from both the Canada Pension Plan Investment Board and the Abu Dhabi Investment Authority, according to PERE's Research and Analytics division.