Brexit is “not something to be passive about”, according to BlackRock’s head of real assets.
Speaking at IPE Real Estate’s Real Assets & Infrastructure conference in London on Wednesday, Jim Barry said investors would need to consider the UK’s impending departure from the European Union when making commitments.
Barry, who heads BlackRock’s real assets group – created at the start of this year as part of a wider reorganisation – said Europe as a whole was “hugely challenged”.
“Brexit has just exacerbated that,” he said. “In the short term, we’re seeing a pausing rather than a fundamental repricing. The UK’s credit quality won’t change. But policy will change.”
Barry said investors in the UK market – which he described as “two-speed”, with high prices for large headline investments – should keep an eye on prices, volumes and flows.
Europe, he said, remains a large, liquid market with a diverse deal flow.
The Continent’s shifting demographics are factors for investors to consider, while an increased use of renewables is also having an impact on the energy sector, Barry said.
BlackRock Real Assets recently raised €650m for its Renewable Income Europe fund, with backing from 25 institutional investors in Europe and Asia.
Wind and solar projects in Western Europe are the fund’s main focus.
Barry said investors in real assets needed to decide what level of risk they were happy with, with government interference being a “very real risk” across the asset spectrum.
“You cannot ignore government policy,” he said.
Barry cited the Ontario federal government’s position on infrastructure as a positive example of government behaviour.
“[They have] consistently stood behind infrastructure contracts,” he said.
In emerging markets, investment is now “all about the city state”.
Barry also told delegates a local presence in markets was vital.
“The ‘fly-in, fly-out’ approach makes investing a much riskier endeavour,” he said.
Barry’s view that investors should be less rigid in their classification of assets was echoed throughout the day.
“We’re seeing our clients view real-asset allocations before you get to down to [sector] segmentation,” Barry said.
“We move from a description of the asset to the outcome. The way we think about the asset class has changed.”
