Global institutional investors set to buy infrastructure and real estate – AMP report
Institutional investors are likely to continue to increase allocations to alternative asset classes, especially direct infrastructure, private equity and listed real estate, according to the latest AMP Capital Institutional Investor Report.
The survey of global institutional investors who manage a collective $1.9trn revealed a net increase in allocations to alternative investments in Q1 2013.
AMP Capital, a subsidiary of Australia’s AMP Limited, manages over A$130bn (as at 31 March 2013) on behalf of clients through a global network of offices in developed and emerging markets.
Almost a third of survey respondents anticipated an increase in their allocation to alternatives in 2013, with listed and unlisted real estate and infrastructure making up one of the fastest growing segments.
Among other findings: almost 40% plan to increase their investments in direct/unlisted investments in 2013, suggesting private, direct investments are seen as a source of attractive returns.
In Asia, 36% of respondents anticipate increasing their direct/unlisted investments in the year ahead, while 46% of those in Europe and 38% in the Americas foresee such a change.
Real assets already play a substantial role in investors’ existing asset allocation strategies with 30% holding more than 10% in real assets.
Asked whether they were likely to increase their allocations to real assets, 72% of respondents said they would be most likely to increase investment in real estate, 56% in infrastructure, 28% in infrastructure debt and 17% in commodities (with 22% citing other real assets).
Some 46% of European investors expect to allocate more funds to real assets in 2013, compared with only 18% in Asia and 28% in the Americas.
Almost 50% of these European respondents expect to invest in more direct, unlisted investments, focusing on infrastructure and infrastructure debt, whereas in Asia, respondents showed the greatest interest in real estate, infrastructure and infrastructure debt.
Just over 30% (32%) of survey respondents said they were more likely to expand into new asset classes -including infrastructure, private equity, real estate and renewable energy – when asked what structural changes they expect to make in the year ahead. Twenty-seven per cent said they expect to limit risk in various ways and 24% expect to increase their roster of managers.
There is no sign of the much talked of ‘great rotation’ from bonds to equities amongst institutional investors, with 79% saying they had no plans to move out of cash and fixed income this year.
Global and domestic government bond holdings were increased by 29% and 28% of respondents respectively in Q1 2013. Portfolio rebalancing in Europe will not come at the expense of cash or fixed income allocations and only 9% of institutional investors in Europe plan to move out of cash or fixed income compared with 23% in the Americas and 27% in Asia.
Institutional investors in Asia increased their investment in domestic government bonds, listed bond funds, global government bonds, mezzanine debt and other debt instruments in Q1 2013.
This growth in fixed income allocations in Asia is likely to continue in the second quarter, while interest in direct/unlisted investment among respondents in Asia is comparable with respondents in Europe and the Americas.
AMP Capital chief executive International and head of Global Clients Anthony Fasso said: “The trend for large institutional investors globally to increase their allocations to alternative asset classes is set to continue.
“This suggests investors are seeing private, direct investments as an attractive source of alternative returns with less volatility than long-term equity and bond investments, despite the often illiquid nature of direct investments such as private equity, infrastructure and direct real estate,” he said.
“A rotation out of bonds and into equities has not been widely adopted among global institutional investors. Rather we see them moving out of cash and into both bond and equity investments, and making shifts within their fixed income investments by moving away from sovereign bonds and into high yield corporate debt,” Fasso said.
For a full copy of the report, visit www.ampcapital.com/iir