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The new safe haven: Making the case for European real estate long income

15 September 2022 6 minute read
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In challenging economic and market environments, high quality and defensive assets providing predictable, inflation-linked income returns, such as real estate long income, can offer a compelling solution for investors.

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The new safe haven:

With inflation hitting multi-decade highs, central banks in major developed markets have finally been forced to abandon the long-running era of easy monetary policy; interest rate hikes rather than cuts characterise the new regime.

At such times, when government bonds are less of a safe haven, investments offering resilience and stable returns are hard to find. Real estate long income offers the potential to deliver on both counts.

Real estate long-income strategies are underpinned by a focus on the quality and duration of rental income: investing in properties let to investment-grade public and private sector tenants on leases with secure contractual terms of at least 15 years.

The asset class aims to provide investors with secure and predictable, inflation-linked income returns and low volatility through market cycles. It demonstrated impressive resilience through the COVID-19 pandemic and showed similar strength during other episodes of market turmoil.

Download ‘The new safe haven’ to understand:

  • Why the characteristics of long-income real estate are particularly relevant for long-term income investors and the role of the asset class in diversified portfolios
  • How the structures of long leases can offer vital protections to investors
  • The growing importance of ESG considerations in real estate long income

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Key risks

Investment risk

The value of an investment and any income from it can go down as well as up and can fluctuate in response to changes in currency and exchange rates. Investors may not get back the original amount invested.

Return profile

Long-lease assets are expected to be comparatively resilient at stress points, but may lag when traditional real estate markets are booming.

Real estate risk

Where funds are invested in real estate, investors may not be able to redeem any units in the fund when they want because real estate assets may not always be readily saleable. If this is the case, we may defer a request to switch or cash in shares or units.

Valuation risk

Certain assets held in the fund could, by nature, be hard to value or to sell at a desired time or at a price considered to be fair (especially in large quantities), and as a result their prices could be very volatile.

Important information

THIS IS A MARKETING COMMUNICATION

Except where stated as otherwise, the source of all information is Aviva Investors Global Services Limited (AIGSL). Unless stated otherwise any views and opinions are those of Aviva Investors. They should not be viewed as indicating any guarantee of return from an investment managed by Aviva Investors nor as advice of any nature. Information contained herein has been obtained from sources believed to be reliable, but has not been independently verified by Aviva Investors and is not guaranteed to be accurate. Past performance is not a guide to the future. The value of an investment and any income from it may go down as well as up and the investor may not get back the original amount invested. Nothing in this material, including any references to specific securities, assets classes and financial markets is intended to or should be construed as advice or recommendations of any nature. Some data shown are hypothetical or projected and may not come to pass as stated due to changes in market conditions and are not guarantees of future outcomes. This material is not a recommendation to sell or purchase any investment.

The information contained herein is for general guidance only. It is the responsibility of any person or persons in possession of this information to inform themselves of, and to observe, all applicable laws and regulations of any relevant jurisdiction. The information contained herein does not constitute an offer or solicitation to any person in any jurisdiction in which such offer or solicitation is not authorised or to any person to whom it would be unlawful to make such offer or solicitation.

In Europe this document is issued by Aviva Investors Luxembourg S.A. Registered Office: 2 rue du Fort Bourbon, 1st Floor, 1249 Luxembourg. Supervised by Commission de Surveillance du Secteur Financier. An Aviva company. In the UK this document is by Aviva Investors Global Services Limited. Registered in England No. 1151805. Registered Office: 80 Fenchurch Street, London, EC3M 4AE. Authorised and regulated by the Financial Conduct Authority. Firm Reference No. 119178. In Switzerland, this document is issued by Aviva Investors Schweiz GmbH.