Infrastructure most favoured asset class, report finds

Infrastructure appears to be the most favoured sector among institutional investors, according to a survey by bfinance.

A survey conducted by the London-based consultancy in May 2010 shows that investors continue to diversify into riskier assets and alternatives. 

“We have been involved in quite a number of meetings with large institutional investors on both sides of the Atlantic and it is clear that there is a desire to bolster allocations to infrastructure,” David Vafai, chief executive of bfinance, told Structured Finance News. “Its long-term investment horizon is highly attractive for investors such as pension funds seeking liability-matching assets.”

The study required investors to provide both their six-month and three-year target asset allocation. Asked how they expect their target asset allocation to change in the coming three years, 38 percent said they will increase their target asset allocation to infrastructure while 6 percent plan to decrease it. Another 28 percent said they plan no change while the rest have no exposure, according to the bfinance report.

“As interest rates have moved lower, we have to diversify into new areas such as infrastructure to achieve the kind of returns ultimately needed to pay out pensions,” notes Staffan Sevón, chief investment officer of VERITAS Pension Insurance in a summary of the report’s findings. 

Other areas where an increase is expected are the property and private equity asset classes, where investors expect allocation increases of 9 percent and 19 percent, respectively, over the next three years, according to the survey.

Investors view public equities most unfavourably. According to the survey, 17 percent of investors said they expected a decreased allocation to equities over the next six months and 37 percent a decrease over the next three years.