- Advertisement -
- Advertisement -

Related

All Aboard the Bubble!

Industry Report

- Advertisement -

Stockholm (HedgeNordic) – One distinguishable trend in the institutional investor universe has been the gradual but clear shift toward increased exposure to real assets such as real estate and infrastructure. Real estate experts state that this reallocation of assets represents a significant tendency among many pension funds, sovereign wealth funds, endowments and foundations.

Some even claim that the rediscovery of the potential of real assets represents one of the most noticeable themes of this decade within the institutional investment community. The growing appeal of real estate and infrastructure has been challenging the traditional mix of equities and bonds within pension fund and private investor portfolios. Fixed-income investments offer insufficient yields, while the upside potential of equities remains subdued in many markets due to modest economic growth and fully-priced stock market valuations. As a result, institutional investors are constantly searching for sources of long-term income, simultaneously seeking protection from future increases in market volatility and impending inflation instigated by global quantitative easing programs.

A series of studies conclude that increased exposure to real assets can have a beneficial effect on a traditional portfolio by reducing volatility and increasing returns. For instance, real estate specialist CenterSquare Investment Management studied the effects of a 20%-allocation to real assets on a tradition 60/40 portfolio (with 60% equity and 40% bond allocation) over the period of 1995 to 2015, with their study showing that a portfolio with 10% of investable assets in private real estate, 5% in listed real estate and 5% in listed infrastructure exhibited both an annual return and a volatility of 7%. This compares to the return of less than 6% and volatility of over 9% for the traditional 60/40 portfolio. Given the local nature of real assets, different real asset categories normally exhibit low correlations both with public financial markets and with one another. In addition, the long-term nature of real estate investing matches up well with the long-term liabilities of many institutional portfolios.

This article is part of our special report on real estate and infrastructure. Read the rest of the article and more about the industry here.

Subscribe to HedgeBrev, HedgeNordic’s weekly newsletter, and never miss the latest news!

Our newsletter is sent once a week, every Friday.

Eugeniu Guzun
Eugeniu Guzun
Eugeniu Guzun serves as a data analyst responsible for maintaining and gatekeeping the Nordic Hedge Index, and as a journalist covering the Nordic hedge fund industry for HedgeNordic. Eugeniu completed his Master’s degree at the Stockholm School of Economics in 2018. Write to Eugeniu Guzun at eugene@hedgenordic.com

Latest Articles

Formue Highlights Private Credit’s Role in New Economic Era

Nordic wealth manager Formue has long prided itself on delivering institutional-grade investment solutions to high-net-worth individuals. As global economic conditions shift, Formue sees an important role...

Chelonia Select Builds on Solid 2024

Stock-picking hedge fund Chelonia Select is off to a strong start in 2025 with an 8.3 percent gain through the end of May, building...

CABA Capital Expands the Flex Series

Danish fixed-income boutique CABA Capital has launched the third vintage of its leveraged, closed-end fixed income strategy: CABA Flex3. The fund aims to deliver...

Aegon AM Launches Capital Call Finance Fund

Aegon Asset Management has launched the Aegon Capital Call Finance Fund, providing institutional investors with access to the capital call finance market – a...

Evli’s Co-Investment Strategy: Opening the Door to Direct Private Equity Deals

Co-investing alongside private equity funds has become increasingly important for institutional investors seeking greater control, reduced fees, and selective deal exposure. Once reserved for...

From Loans to Layers: Navigating the CLO Capital Stack

Collateralized Loan Obligations (CLOs) play an important role in credit markets by bridging the capital needs of corporate borrowers with the return objectives of...

Allocator Interviews

In-Depth: High Yield

Voices

Request for Proposal

- Advertisement -
HedgeNordic
Privacy Overview

This website uses cookies so that we can provide you with the best user experience possible. Cookie information is stored in your browser and performs functions such as recognising you when you return to our website and helping our team to understand which sections of the website you find most interesting and useful.