Global Investors Seek Infrastructure, Real Estate: Report

OMFIF reveals the 2017 trend toward alternatives and sustainable investing.

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458414_rainbowGlobal institutional investors’ assets under management rose 7.3 per cent in 2017 to US$36.2 trillion, the largest increase in five years, according to the Official Monetary and Financial Institutions Forum.

The London, England, and Singapore-based independent think-tank’s report tracks 750 global public pension, sovereign funds and central banks, holding assets equivalent to 45 per cent of the world economy. Fifteen of Canada’s largest pension funds are are among those surveyed, including the Alberta Investment Management Corp., the British Columbia Investment Management Corp., the Ontario Municipal Employees Retirement System, the Ontario Teachers’ Pension Plan and the Saskatchewan Pension Plan.

The report highlighted moves by several Canadian pension funds in infrastructure and real estate, as well as activities in sustainable investing. It noted the Public Sector Pension Investment Board’s recent acquisition of the Downsview industrial property from Bombardier Inc.; the Canada Pension Plan Investment Board’s involvement in India’s first private infrastructure investment trust; and the Caisse de Dépôt et Placement du Québec’s commitment to decarbonization.

According to the report, assets grew across all continents, boosted by the global economic recovery and an upturn in equity markets. The largest percentage increase in assets was among European public investors, whose holdings rose by US$7.6 trillion, 12 per cent higher than in 2016. And Asia was the second-best performing region, with assets growing by US$950 billion.

While equities make up 40 and 36 per cent of sovereign and pension funds’ portfolios, respectively, about 25 per cent of those surveyed said they plan to reduce their equity holdings. Investments in infrastructure and real estate were considerably more popular, with 70 and 45 per cent of respondents planning to increase their respective investments in those asset classes.

“The relatively shallow economic recovery since the 2007-08 dislocation has aided asset growth, particularly in the light of increasing allocations (even among traditionally risk-averse institutions) towards equities and real assets,” said David Marsh, chairman of the OMFIF, in the introduction to the report.

“But, as interest rate policies gradually normalize (at ominously different speeds) in different parts of the world, growth will almost certainly diminish in the next two to three years.”

Institutional investors are also adjusting their investment strategies to reflect their commitment to responsible ownership, according to the report. More than a third (36 per cent) of public investors said they plan to increase their investments in green bonds over the next 12 to 24 months, with about 18 per cent noting the same for green equities.

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