Sovereign wealth funds and central banks prefer real estate as an alternative investment, according to Invesco’s Global Sovereign Asset Management Study 2016.
The study of 77 sovereign investors and reserve fund managers across the globe — representing $8.96 trillion of assets — found allocations to real estate rose to 6.5 percent in 2015 from 3 percent in 2012.
According to the study, sovereigns said real estate achieves the diversification benefits and absolute returns they desire with fewer execution challenges than private equity or infrastructure. Approximately 34 percent of sovereigns cited challenges sourcing direct deals for real estate compared with 55 percent for infrastructure.
Over the past two years, most sovereign investors have focused on the importance of increasing infrastructure and private equity investments within their strategy for growing alternative assets. But in the past three years, infrastructure allocations have increased each year but total allocations remain low at 2.8 percent on average of total portfolio assets.
The views, statements and opinions expressed in this article are those of the author and are not necessarily those of Institutional Real Estate, Inc.
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Andrea Waitrovich is editor of IREN and web content editor of Institutional Real Estate, Inc.
