In a recent study conducted by Time Investments, it was revealed that investors are poised to increase their allocations to real assets over the next 12 months. The survey, which included insights from 200 UK wealth managers, financial advisers, discretionary fund managers, fund selectors, and investment analysts, highlighted a strong inclination towards real estate and infrastructure.
This shift in investment strategy is driven by several factors, including a desire for portfolio diversification, an increased focus on Environmental, Social, and Governance (ESG) considerations, and a quest for secure income streams.
According to the study, 76% of respondents plan to increase their allocation to real estate, while 74% express a similar intent for infrastructure investments. This trend reflects a growing confidence among investors that real assets will benefit from more favourable macro conditions in 2024.
Time Investments suggests that discounts for listed assets could continue to narrow, creating opportunities for those venturing into these markets.
Diversification remains a primary driver, with 67.5% of respondents citing the desire to de-risk portfolios as a motivation for increasing allocations to real assets. Additionally, 60.5% of respondents highlight an increased focus on ESG considerations as a factor influencing their investment decisions.
The emphasis on sustainable and socially responsible investments aligns with broader global trends toward more environmentally conscious financial strategies.
Furthermore, 44.5% of respondents express a desire for secure income streams. In uncertain economic climates, the stability and reliability of income generated by real assets, such as real estate and infrastructure, make them an attractive option for investors seeking resilience in their portfolios.
The study indicates that 70% of advisers anticipate a challenging economic climate and investment environment, with expectations that conditions will not improve for at least the next 12 months. Andrew Gill, co-fund manager of Time UK Infrastructure Income, acknowledges the prevailing uncertainty but points to stabilising values in most real estate and infrastructure sectors. Gill notes that the reduction in bond yields observed in late 2023 is expected to further support these markets.
Traditionally, decreasing bond yields have piqued investor interest in real assets, creating conditions conducive to growth. The research also notes a significant change in market conditions and expectations, with a drop in UK inflation. This could lead to earlier-than-expected rate cuts, making real assets even more attractive in a lower interest rate environment.
As economic forecasters predict slow economic growth and potential rate cuts, investors are turning their attention to real assets for lower volatility and more stable returns. With 97% of surveyed investors believing that the challenging economic climate favours alternative investments like real assets, it is clear that the allure of these investments lies in their ability to provide robust and growing cash flows.
In the long term, sectors such as real estate and infrastructure are poised to outperform, fuelled by their resilience and the potential for sustained income and dividend increases. The shift towards real assets reflects a strategic move by investors to navigate the uncertainties of the current economic landscape and position themselves for future growth.
(Source: Time Investments/FT)
