49% of insurers expect to increase allocation to real assets investment strategies

Written by Adam Cadle

02/11/2020

Forty-nine per cent of global insurers are expecting to increase their allocation to real assets investment strategies over the next 12 months, a new study has revealed.

The study from Aviva Investors is based on responses from over 1,000 decision-makers at insurers and pension funds representing over €2trn of assets under management, and found that 54% of insurers identified real estate long income as their preferred asset class.

Beyond this, insurers highlighted the desire to increase their exposure to debt strategies with infrastructure debt (48%), real estate debt (46%) and private corporate debt (46%) all expected to see increased investment.

Aviva Investors chief investment officer, real assets, Mark Versey said: “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.”

Fifty-nine per cent of insurers view the transparency of ESG investment approaches as the most important thing they look for in an asset manager. The study also revealed a continued increase in focus on social responsibility by real assets investors. Including healthcare assets in portfolios was a factor for 55% of insurers; investments in social housing (51% of insurers) and education (46% of insurers) were also seen as important.

Given the increased efforts of investors to align their portfolios with net zero emissions targets, there was continued support for investments that make a positive environmental impact. Fifty-eight per cent of insurers looked towards ‘energy-efficient real estate assets’.

The research also said that 44% of insurers see financial instability as the most likely concern for their investments over the next 12 months. 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.

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