Alternatives on menu
European pension funds are showing a clear desire to invest in assets which are not correlated to equities, according to a new report from J P Morgan Fleming Asset Management.
“There is a clear desire among pension funds across Europe to tap into investments which are not correlated with equities,” said Peter Schwicht, head of European institutional business at the firm in Frankfurt.
“It is up to the fund management industry to provide the investment vehicles and the education required to help institutional investors manage these alternative investment classes effectively.”
The survey, which polled 314 institutions, found that 70% of respondents were invested in real estate, while 48% were invested in private equity. Twenty-two percent were invested in hedge funds while 23% were in currency overlay.
Real estate’s low correlation with other asset classes was cited as the key reason for its attractiveness. It was also seen as having low volatility and the potential for higher returns and income.
“The high incidence of investment in real estate is in line with our expectations since historically, institutions across Europe have favoured direct investment in real estate within their respective domestic markets and indeed on the most part, real estate is regarded as a ‘core asset class’ rather than an ‘alternative asset class’,” Schwicht said.
J P Morgan said the respondents represented more than one trillion euros in institutional assets.