Real asset allocations to rise, inflation drives shift
Global asset manager Aviva Investors has published the findings of its Real Assets Survey 2023, which involved a survey of 500 institutional investors from across the globe.
According to the research, approximately two thirds of institutional investors planned to increase allocations to real assets over the next two years, of which, 23% expected to increase their exposure by less than 5% for forecast growth of between 5-10%.
Conversely, just 12% of respondents noted plans to reduce real asset allocations.
At present, approximately 47% of investors managing real assets held allocations of up to 10%, with approximately one fifth exposing at least 20% of their portfolio to the asset class.
Inflation driving growth in real asset allocations
According to Aviva’s survey, a growing number of investors had increased their exposure to real assets over the past three years as a hedge against inflation, up from 33% to 53%.
This trend was reflected across all three regions listed in the research, with inflation cited by investors as the reason behind their real asset allocations in North America (63%), Europe (53%), and the Asia-Pacific (42%).
Over the same period, the proportion of institutional investors managing real assets to diversify their portfolio fell from 64% to 57%.
However, diversification remained the primary driver for investing in real assets, closely followed by inflation proofing, delivering long-term income (38.2%), capital preservation (36.8%), capital growth (31%), liquidity premium/uncorrelated returns (30%), positive ESG impact (27.6%), and cashflow matching (20.8%).
ESG impact of real assets
The Aviva study also explored sentiment toward ethical, social, and governance (ESG) investing among respondents, with more stating they would leverage real asset allocations to make a positive ESG impact — up from 17% to 28%.
ESG sentiment was strongest among investors in Europe, with just 2.4% stating ESG was not a consideration for their investment in real assets.
In contrast, 15.2% of institutional investors in North America did not consider ESG when making real asset investment decisions.
AUTHOR
Charbel Kadib
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