Decision makers at global financial institutions share their views on asset allocation, sustainability and risk in their real asset investments.

In this year’s study, we took the views of 110 global financial institutions (GFIs), representing 22 per cent of our total survey cohort. Just over one half were based in Europe, with good representation from organisations in Germany, the UK, France and Switzerland. Representation in APAC was also strong, with organisations from China and Hong Kong featuring strongly, followed by Australia, South Korea, Singapore and Japan.

Our survey group was tilted towards larger organisations; almost half reported £20 billion or more of assets under management. In this group, a significant number already allocate ten per cent or more to real assets and almost one fifth have allocations of 20 per cent or higher (see Figure 1). Generous allocations (20 per cent plus) were a notable feature among North American GFIs.

Figure 1: What portion of your institution’s investment portfolio is currently invested in real assets? (per cent)

Among our survey group, real estate equity was the most popular asset class in terms of current allocations, followed by real estate long income and infrastructure equity (see Figure 2). Clear regional preferences emerged, with North American GFIs tending to hold more real estate equity (36 per cent), while organisations in APAC weight infrastructure debt (15 per cent) and real estate debt (16 per cent) more heavily than the global average. European investors had larger weightings to real estate long income (15 per cent) and infrastructure equity (15 per cent) their international peer group.

There are also marked differences in allocations to nature-based solutions such as forestry, which are currently higher among North American GFIs (nine per cent) than among European respondents (two per cent). 

Figure 2: How is your institution's real assets portfolio allocated today? (per cent)

The majority of our survey group intend to increase their real asset allocations over the next two years (see Figure 3). More than two fifths of GFIs are looking to add five per cent or more to their real asset portfolio allocations. These potential buyers far outweigh those intending to trim exposure. In terms of regional nuances, 47 per cent of Asian and North American GFIs expect to increase allocations by between five per cent and 15 per cent, respectively, while over six per cent of European GFIs intend to increase allocations by more than 15 per cent. 

Figure 3: Do you expect to increase or decrease your allocation to real assets over the next 24 months and, if so, by how much? (per cent)

Motivations for real asset allocations

The most common motivation for GFIs to invest in real assets is diversification, which led the list of top-three ranked preferences among our survey group. This is expected to increase in importance, rising from 58 per cent of our cohort today to 66 per cent in two years’ time. While an ability to provide inflation-linked income is the second-biggest motivation today, GFIs expect this to lessen in significance, with only 37 per cent expecting this to be their primary reason for investing in two years’ time (see Figure 4). This perhaps reflects the widely held perception that inflation and interest rates have peaked.

Other motivations expected to increase in importance over the next two years include long-term income (rising from 38 per cent to 54 per cent), capital growth (rising from 36 per cent to 41 per cent), the ability to have a positive ESG impact (rising from 31 per cent to 35 per cent), and the illiquidity premia real assets potentially offer over public markets (rising from 26 per cent to 30 per cent). Regional nuances include North American GFIs having high expectations of real assets delivering capital growth in two years’ time (67 per cent, versus 34 per cent in APAC).

Another notable takeaway is the expectation that cashflow matching will become a less significant driver overall. This important characteristic, prioritised by 29 per cent of our survey group today, is expected to fall in significance (to six per cent) in two years’ time.

Figure 4: What is your primary reason for allocating to real assets today, and what do you expect to be the most important driver in the next two years? (per cent)

Ways to invest

When seeking to make allocation changes, most GFIs (53 per cent) stated a preference to invest directly. Others flagged single or multi-asset pooled funds among their top three picks, including vehicles with specific ESG objectives, as well as co-investing via club deals (see Figure 5).

However, there were some clear regional differences. The preferred route of North American investors, for example, is to invest in multi-asset pooled funds (67 per cent). Asian investors like direct investing (53 per cent), and also showed support for single asset-class pooled funds (50 per cent) and co-investing/club deals (34 per cent). Perhaps reflecting that the region’s investors are further along in their ESG journey, 33 per cent of European investors backed pooled funds with a specific ESG goal, compared to 22 per cent of North American and 25 per cent of Asian investors.

Figure 5: What is your preferred way of investing in real assets? (per cent)

Expected returns

Our survey group believes returns are likely to increase from modest or even negative in the near term, to positive further out. While return expectations varied considerably by asset class in the short term, expectations tended to coalesce for private markets and benchmark global equities over five years, with the group anticipating a revival across all asset classes over time (Figure 6).

GFIs believe returns are likely to increase from modest or even negative in the near term, to positive further out

Among GFIs, that swing from negative to positive expectations is most evident in real estate equity, the most popular asset class overall. While 21 per cent of the cohort expect negative returns over one year, no respondents expected annualised returns to be negative over five years, and 22 per cent expressed the view that annualised returns could reach ten per cent or more over that timeframe, perhaps reflecting their conviction in being able to achieve success in asset selection.

Other regional differences worth noting are rising expectations for infrastructure equity, particularly in Europe, where 42 per cent of respondents expect annualised returns in the five to 9.9 per cent range over five years. In North America, one third of the respondents expect annualised returns over ten per cent in the same timescale. In APAC, only a small minority (three per cent) expect to meet the ten-per cent plus return threshold.

Expectations of risk-adjusted returns from real estate long income are more muted but also positive over five years. The majority (38 per cent) expect to achieve in the three-to-4.9 per cent range, but expectations are higher in North America (39 per cent expect five to 9.9 per cent over five years). A smaller group (six per cent) hope to exceed the ten per cent bar.

Figure 6: What annualised risk-adjusted returns do you expect for different real assets and public market asset classes over one, three and five years? (per cent)

Note: To gauge their return expectations, respondents were asked to choose between illustrative return bands, which are based on historic market data and take into account the potential for both positive and negative market conditions: negative returns; zero-2.9 per cent; three-4.9 per cent; five-9.9 per cent; ten per cent or more (or “don’t know”). Weighted average returns were calculated using the midpoint for each expected return band (e.g., for zero to 2.9 per cent, it is 1.45 per cent) multiplied by the percentage score for that band. The total for all the return bands for a period was then used to give the weighted average return. For the “negative returns” band, a figure of -1 per cent was used, and 11 per cent for the “ten per cent or more” return band. The “don’t know” responses were omitted for all weighted average return calculations.

Views on sustainability

The majority of GFIs in our cohort are paying close attention to sustainability. It is a critical and deciding factor in investment decisions for 22 per cent, while the majority recognise a duty to invest sustainably; 48 per cent say they take ESG considerations and sustainability into account (Figure 7).1 Six per cent give the factor no weight at all when making real asset investment decisions, a theme more prevalent among North American GFIs.

Interest in sustainability is growing in North America but still markedly lower than elsewhere, with 16 per cent of the cohort impassive about ESG impacts. Among these organisations, 33 per cent have no agreed net-zero target, more than twice as many as in Europe (16 per cent) and over three times the level reported in APAC (ten per cent).

Figure 7: Which of the following best describes your organisation's approach to ESG/sustainability within real assets? (per cent)

Significantly, our respondents report their interest in sustainable real assets is more driven by select investment opportunities and desire for risk mitigation than alignment with corporate values. When ranking the most salient features to consider when investing in sustainable real assets, for example, 80 per cent of respondents cited the ability to prioritise financial returns and integrate other ESG factors, ahead of those seeking ethical exclusions (48 per cent), for example (see Figures 7 and 8). The capacity to deliver returns and sustainability, performance and impact was cited as an attribute GFIs want their managers to deliver.

Interest in sustainable real assets is driven by select investment opportunities and desire for risk mitigation

At a thematic level, interest was evenly spread between climate transition solutions (34 per cent), solutions based around “already-green” assets (32 per cent) and strategies with embedded sustainability targets (33 per cent).

When considering opportunities underpinned by environmental and social objectives more closely, our respondents highlighted important nuances: firstly, return generation and risk diversification are prioritised ahead of ethics and impact. Secondly, metrics need to be formalised; the need to achieve measurable change versus specific objectives came through particularly strongly from GFIs in North America (72 per cent) and Europe (53 per cent) when ranking their top preferences.

Figure 8: Most appealing factors of sustainability in real assets (per cent)

Grappling with sustainability commitments

Decarbonisation looms as an operational challenge. While more than half the respondents in our wider survey group stated they were “not confident at all” or “somewhat unsure” of the actions needed to meet their long-term sustainability commitments, many GFIs are reporting progress linking their net-zero target to an ESG and/or real assets allocation, as Figure 9 shows. While some GFIs are still scoping out how feasible explicit commitments are, 57 per cent of European GFIs have made headway, as have 47 per cent in Asia. North American institutions lag in this aspect of their asset management (22 per cent). 

Figure 9: Are you currently linking your net-zero target to your overall ESG allocation and/or to your real assets allocation? (per cent)

Risks and barriers

In a challenging macro environment, GFIs are mindful of risk, with the high interest rate regime (flagged by 64 per cent of the survey group), potential for global recession (48 per cent) and liquidity risk (36 per cent) seen as the most pressing concerns for real assets investors when ranked (see Figure 10). A granular look also reveals higher fears of recession in North America than among the wider group (61 per cent) and particular concerns about impending market volatility in APAC (flagged by 47 per cent of respondents).

Figure 10: When it comes to investing in real assets, which of the following risks do you consider most concerning over the next 12 months? (per cent)

Putting investment to work in sustainable real assets in this macro environment is not straightforward. Although most respondents are aware of opportunities (62 per cent), anticipate improving financial performance (60 per cent overall, 67 per cent in APAC) and appreciate the opportunity to enhance risk management via their real assets investment (45 per cent), many say they are finding it comparatively difficult to invest. (Figure 11 flags key investment drivers ranked by our survey group.)

Figure 11: What is driving your organisation to invest, or increase your overall allocation, to sustainable real assets? (per cent)

Manager preferences

Perhaps unsurprisingly, a sound investment record is the most sought-after criteria for GFIs when selecting a manager. Eighty per cent say this is “important” or “very important”, with the strongest performance-led views expressed by North American GFIs (83 per cent prioritise investment performance). The comfort of granular holdings data, ability to evidence risk and/or impact, and enhanced portfolio reporting are also valued.

Not all asset managers are delivering on these counts. Our survey shows some dissatisfaction with established managers: ten per cent of the survey group say their manager is falling short in some aspects, with particularly high dissatisfaction in APAC (18 per cent) and North America (11 per cent). This suggests 2024 could bring opportunities for best-in-class operators who can bring together the expertise and operational excellence GFIs are seeking.


  1. ESG and sustainability are related but distinct concepts. ESG refers to Environmental, Social and Governance characteristics and provides a structure for measuring companies’ or assets’ performance against these three criteria. Sustainability is a broader category that takes into account ESG performance over time, along with other activity that can be considered as taking account of profit, people and the planet. A formal definition of sustainability is provided by the UN: “Meeting the needs of the present without compromising the ability of future generations to meet their needs.”

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The sixth edition of the Aviva Investors Real Assets Study is our biggest yet. At a time of macroeconomic uncertainty, real assets continue to play a significant role in the investment strategies of global institutions. This year’s survey seeks to answer some key questions: How is the higher interest-rate environment affecting appetite for real assets? What are institutions’ return expectations across strategies? And how do views on sustainability differ between regions?

Webcast: Real Assets Study 2024

05 Mar 2024 14:00 GMT 60 minutes

Join members of the Aviva Investors Real Assets team as they talk through the highlights of the Real Assets Study 2024 and also discuss the key themes real assets investors should watch out for in 2024. This webcast is in association with IPE.

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