With the recovery in investment markets well established, the shape of Europe's institutional portfolios is becoming clearer. The 11th annual edition of the European
Institutional Asset Management Survey (EIAMS), whose focus is on European pension funds, points to real estate maintaining its position in investor portfolios between 2009 and 2010, however, it continues to dominate the 'alternatives' asset class.
Overall, the survey points to an ongoing increase in fixed income allocations in European institutional portfolios, while equities were pared back somewhat.
But despite the growing dominance of fixed income, "the real assets story is far from over," says Simon Redman, Invesco Real Estate's Head of Product Management.
"Real estate continues to dominate alternatives, accounting for two-thirds of total allocation. Meanwhile, private equity and hedge funds are finding it difficult to reassert themselves.
"This year's survey shows that European institutional investors are again embracing alternatives with a total allocation of 11.5% of respondents' portfolios invested in the sector. The allocation level is back up to and beyond the levels of 2007, when 10% was allocated to the sector. As in the previous two years, real estate forms the lion's share of this allocation, with 7% of investor's total assets in this category, compared with 6.6% in 2009."
Real estate investing is now most popular with investors from Benelux, displacing Switzerland into second place, followed by Great Britain and Ireland. In addition, smaller investors appear to be showing increased confidence in real estate.
"26% of investors are poised to raise their real estate allocations, with only 7% planning to reduce this component in their multi-asset portfolios. Indeed, real estate is now at its highest level for the past three years and remains the cornerstone of alternatives investing. Overall confidence in real estate looks set to grow," says Redman.
The survey also shows that domestic real estate investment now makes up 63% of the average institution's overall property allocation, compared to just 18% in equities portfolios.