Real estate dominates ‘alternatives’ asset class

Real estate has been confirmed as the primary focus for European pension funds. The European Institutional Asset Management Survey (EIAMS), now in its 11th year, confirms that this sector maintains not only its primary position in investor portfolios but continues to dominate the ‘alternatives’ asset class.

Nevertheless, the survey also confirmed an ongoing increase in fixed income allocations in European institutional portfolios, while equities were pared back somewhat. Despite the continuing favour in fixed income, Simon Redman, Invesco Real Estate’s Head of Product Management, insists, “The real assets story is far from over. Real estate continues to dominate alternatives, accounting for two-thirds of total allocation. Meanwhile, private equity and hedge funds are finding it difficult to reassert themselves.
 
“This year’s survey shows that European institutional investors are again embracing alternatives with a total allocation of 11.5% of respondents’ portfolios invested in the sector. The allocation level is back up to and beyond the levels of 2007, when 10% was allocated to the sector. As in the previous two years, real estate forms the lion’s share of this allocation, with 7% of investor’s total assets in this category, compared with 6.6% in 2009.”
 
Real estate investing is now most popular with investors from Benelux, who have pushed Swiss investors into second place, followed by Great Britain and Ireland. Invesco reports smaller investors are also demonstrating increased confidence in real estate. “26% of investors are poised to raise their real estate allocations, with only 7% planning to reduce this component in their multi-asset portfolios. Indeed, real estate is now at its highest level for the past three years and remains the cornerstone of alternatives investing,” says Redman.
 
The survey also shows that domestic real estate investment now makes up 63% of the average institution’s overall property allocation, compared to just 18% in equities portfolios.

www.invesco.com