Institutional investors looking to reap returns in the real estate market should explore long-income portfolios and ones where the income is indexed to inflation to deliver and optionality, LGIM Real Assets has said.
“Long income portfolios are a contracted income approach, the firm said, with the long lease creating “a bond-like cash flow that is relatively immune to recessions”.
“Equally, portfolios where the income is indexed to inflation can deliver growth as well as contributing to liability matching for institutional investors.”
The company said that returns in 2018 are set to favour more defensive portfolios, whilst an uncertain outlook highlights a need to balance resilience with optionality.
“More defensively positioned portfolios, and those where managers have been focusing on assets which are positioned to meet occupier needs, will be the winners in the short- term. The next twelve months are likely to see underperformance for assets which are highly geared to the economic cycle.”