'Real estate to benefit from asset allocation shifts'

Investment allocation to real estate has emerged as a distinct trend and confirmed its place as a main asset class in many European markets, according to the European Institutional Asset Management (EIAMS) 2008 survey. EIAMS, which has tracked the development of alternatives since 2002, also found that Exchange traded funds (ETFs) and Socially Responsible Investing (SRI) are emerging as potential new growth stories with both on average gaining ground in acceptance by those European institutions surveyed this year. EFTs were used by about one half of the larger investors and one quarter of smaller and medium-sized funds surveyed by the EIAMS. Two fifths of this year's surveyed institutions pursue SRI and corporate governance strategies.

A total of 115 organisations with combined assets under management of nearly $550bn participated in this year's survey, which was conducted by Invesco in partnership with Investment & Pensions Europe (IPE). The EIAMS sample was extended this year to include organisations from the UK and Ireland, central and Eastern Europe and the Nordic countries. In order to track trends among smaller and medium sized investors, the proportion of pension funds was higher than two years ago.

According to the survey, on average, investors held around 32% of their assets in equities, 51% in fixed income and roughly 5% each in real estate, cash and alternatives. Changes planned for the coming year indicate continued strong growth in all alternative asset classes and a shift away from investment in the United States and towards Asia.

'Alternatives have come more and more into their own as portfolio diversifiers with a low correlation to equity markets as well as attractive return potential,' commented Yves van Langenhove, head of Institutional Business Western Europe at Invesco.

The report found real estate topped the list of alternative asset classes and in some countries real estate was already a main asset class. Swiss pension funds invest 22% of their total assets in real estate followed by British and Irish funds who invest 9% in property while German, Italian and Benelux pension funds have more than 7% in this asset class. At a European level, large and medium sized pension funds invest on average 10% in real estate.