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​Institutional investors favour direct ownership of real assets – Aquila

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Institutional investors prefer direct ownership of real assets, according to a study by Aquila Capital.

Aquila said 57% of the European investors it surveyed believe direct ownership is the best approach.

However, only 43% currently use it.

Stuart MacDonald, managing director at Aquila, said: “There is a growing appreciation among institutional investors of the benefits of direct ownership of real assets, and, over the coming years, we can expect to see a narrowing of the gap between actual and desired levels of this approach.”

Institutional investors are, Aquila said, set to increase their direct ownership of real assets.

Specialised investment funds are used by 38% of those surveyed, closed-end funds by 32% and club deal/co-investments and managed accounts by 16%.

Nine out of 10 investors (90%) said they had some exposure to real assets, and 44% had more than 10% exposure.

Property was the most popular asset, with 74% of investors having exposure to it, followed by infrastructure (37%), commodities (26%), renewable energy (21%), timber (18%), shipping (7.9%) and farmland (2.6%).  

The study showed that the most significant deterrent to investing in real assets was the lack of liquidity, which was cited by 55% of respondents.

Other reasons included institutions’ lack of understanding of real assets (33%), limited long-term performance history (30%), a lack of suitable investment products (25%), fear of poor returns (23%) and unwillingness to diversify into ‘untested’ investment sectors (20%).

For real assets to become more compelling, institutional investors said product providers must demonstrate greater transparency (60%), assets should be run by managers with experience of managing them (41%), fees should be lower (32%), due diligence should be clearer (30%) and products need better scalability (14%).

Investors, Aquila said, also need to have a clearer understanding of the risk/return profile of real assets (41%).

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