Infrastructure has proved itself the most popular asset class among a pool of surveyed institutional investors, with a majority intending to increase their allocations to it this year.
The results are the highlight of a survey of 62 institutional investors – representing some $1.9 trillion of capital – conducted by Australian asset manager AMP Capital and Institutional Investor magazine.
In the survey, 84 percent of respondents said they planned to increase their allocations either to infrastructure equity (56 percent) or debt (28 percent) this year, with 72 percent eyeing a boost to their real estate portfolios.
Tellingly, infrastructure was already the most popular asset class during the first quarter of the year, with 47 percent of respondents having increased their allocations to direct infrastructure investments, followed by private equity (26 percent). Infrastructure debt (17 percent) and listed infrastructure (14 percent) also registered allocation increases in Q1.
Almost a third of the surveyed institutional investors plan to increase their investments in alternative assets this year, with 30 percent of those canvassed already allocating more than 10 percent of their total funds to real assets.
This increase in alternative asset allocations means that almost 34 percent of those surveyed expect to conduct more manager searches this year when compared with 2012. This trend is especially strong among pension funds, which comprise the majority of respondents, with 40 percent indicating they are likely to boost their roster of managers. However, only 31 percent of all respondents plan to strengthen their internal asset management capacity.
Source: AMP Capital
“The trend for large institutional investors globally to increase their allocations to alternative asset classes is set to continue,” commented Anthony Fraso, AMP Capital chief executive international and head of global clients.
“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 […] infrastructure. A rotation out of bonds into equities has not been widely adopted among global institutional investors,” he added.
The AMP Capital Institutional Investor Report Q1 2013– available to download here – surveyed institutional investors across North and South America (65 percent), Europe (18 percent) and Asia (18 percent). More than 80 percent of them have more than $1 billion under management.
Forty-eight percent of the respondent pool is made up of pension funds (corporate or public), followed by insurers (13 percent), endowments (10 percent), sovereign wealth funds (10 percent) and family offices (3 percent). The remaining 16 percent are listed as “other”.