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Property and infra to see investment resurgence - study

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GLOBAL - A study of pension funds and institutional investors suggests funds will increase their listed and private equity holdings this year, but the asset classes of most interest for future years are likely to be property, infrastructure and hedge funds of funds.

A bi-annual survey of 60 representative pension plans, endowments, and insurers by Bfinance, the consultancy, indicates at least 46% of respondents will increase equity exposure over the next 12 months, in part to realign their strategic asset allocation since equities have fallen in value, though 35% will actually reduce their exposure from their current positions.

The drop in equity prices over the last year has significantly shifted the weightings in different asset classes, so 73% of the funds questioned said their equity holdings had fallen since the study was last conducted in October 2008. (Click here to see chart 1)

At least 58% of respondents say the crisis has yet to force them to review their investment policy, but of those who said they would, at least 70% expect to do within the next six month.

At least 37% of investors expect to increase their equity weightings within three years, compared with 35% who expect to decrease their holdings, while interest in private equity is expected to grow as 30% say they will show interest compared with just 7% who said they will reduce weighting. (Click here to see chart 2)

Further analysis of potential activity over the next one to three years suggests portable alpha is gaining a little more interest as 14% will invest this year and 19% over three years, compared with just 2% who said they will reduce holdings.

Similarly, hedge fund of funds will pick new interest from 11% of respondents this year and 24% of funds within three years - though 11% and 9% respectively said they will decrease their interest in HfoFs.

The concept of global tactical asset allocation looks to have been damaged somewhat by recent market turbulence and its impact on returns as the survey found just 3% are prepared to increase holdings this year, while 78% will steer clear, and 10% will add GTAA holdings within three years.

Property and infrastructure appear to be favourable diversification investments for the future as the survey also found 24% will increase investments in property over one year and 44% over three years, while infrastructure will leap to the forefront of interest in the coming months as 32% of investors increase holdings over 12 months and 46% increase over three years. By the end of the three years, just 15% of the polled investors are likely to have no holdings in real estate compared with 27% in March, according to Bfinance.

Socially responsible investment is also gaining slow ground as 8% of investors increased exposure since October 2008, and 10% will increase their usage over one and three years.

Bfinance claims the survey seems to suggests that "investors think the worst of the financial crisis is over", as David Vafai, chief executive said: "The survey indicates a surprising change of sentiment from investors within almost half of the respondents expecting an increase in their equity exposure in the next 12 month compared with 19% in our survey last October."

The representative sample of investors as 52% Europe and 48% North America (Canada), while 46% of European respondents were based in the UK, compared with 19% in Germany, Austria and the Netherlands, 19% in the Nordics, 10% in Italy and 6% in Switzerland. Of those questioned, 51% were corporate pension plans, 32% were public pension funds, 10% were foundations and endowments and 7% were insurers.

If you have any comments you would like to add to this or any other story, contact Julie Henderson on + 44 (0)20 7261 4602 or email julie.henderson@ipe.com

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