The coming years will find European institutional investors increasingly turning to real assets, according to new research from alternative asset manager Aquila Capital.
The new paper, titled Real Assets – The New Mainstream, predicts that investors will turn to real assets and equities and bonds will become less attractive.
Details from a press release:
The research predicts that the Dow Jones Index will deliver average total returns of 4% per annum over the next 10 years, while real returns on German 10-year government bonds are set to be negative, even if interest rates were to reach 4% by 2024.
Alongside these estimates, 60% of institutional investors in Europe expect institutional allocations to real assets to increase over the next three years.
Oldrik Verloop, co-head of hydropower at Aquila Capital, says: “This unique investment landscape, for which there is no precedent in history, is giving rise to considerable challenges for pension fund managers struggling to fund deficits.
“Among these challenges is the need to assess the impact of today’s loose monetary policies on global interest rates and inflation tomorrow.”
He says that institutional investors seeking to future-proof their portfolios will be searching for new investment solutions, leading them to shift allocations towards real assets.
“Real assets are uniquely positioned to provide value and enhance overall risk-adjusted returns in a broad range of market environments. The powerful combination of market-independent stability and growth make them an attractive core holding for institutional investors,” he adds.
As part of the research, 50 institutional investors across Europe were surveyed.
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