51% of insurance execs expect real asset investments to increase over next 12 months

Written by Adam Cadle

23/10/2019

Fifty-one per cent of insurance executives expect their investments in real assets to increase over the next 12 months, according to Aviva Investors’ 2020 Real Assets Survey.

“With uncertainty over global growth and the likelihood of interest rates remaining lower for longer, institutional investors continue to look at private assets for diversification and potential illiquidity premium over public markets,” the firm stated.

Forty-four per cent of insurers 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 EU was also a concern.

On the issue of ESG, 40% of insurers consider a ‘favourable ESG impact’ of real assets to be integral. Insurers are also more likely than pension funds to consider the ‘transparency of asset managers’ ESG investment approach’ when looking at external investment providers.

Investors also highlighted a preference for multiple strategies within real assets allocations. Over half of insurers increase investments in real estate finance (54%), infrastructure equity (52%) and structured finance (51%).

The survey added that 43% of insurers raised fears that ‘regulatory interference’ was proving challenging to investment activities, with 37% citing the lack of regulatory harmony across Europe as a concern.

Aviva Investors Real Assets CIO Mark Versey 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[1]. 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.”

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