AMP Capital has predicted that pension funds and other long-term investors will increasingly allocate to real assets, in order to find stable income and to preserve capital.
In the short term, AMP said this would be boosted by several factors, such as the end of QE in the US and a focus on growth, the supply of capital and competition for core assets, large mandates for lower risk, high yield investments, as well infrastructure development in Australia and changes to the US energy sector. According to James Maydew, deputy head of global listed real estate at AMP Capital, most major pension funds around the world have raised real estate allocations to as high as 15%. Maydew said: “For 2015, investors should look at the global gateway cities that are attracting both capital and growth such as London, San Francisco and New York. In an improving economic environment, investors should also be looking for economically-sensitive exposure with high growth such as the lodging and hotels sectors.”
Listed infrastructure is also seen as a growth area in 2015 by AMP. Tim Humphreys, head of global listed infrastructure at AMP Capital, commented: “US growth and its impact on interest rates will have the biggest effect in 2015. The US has experienced a rapid increase in natural gas and oil production from shale deposits, and is now the largest producer of petroleum and natural gas in the world. We expect these trends will require vast amounts to be spent on infrastructure – approximately $35 billion during the next 12 months alone.”
For direct infrastructure, AMP Capital said it expected to see strong interest in utilities and other cashyielding assets in 2015. This includes ports in Australia, power and energy infrastructure in the US and airports and telecommunications infrastructure in Europe. It added that there would be competition for trophy assets in Europe, so mid-market assets could offer better opportunities for investors on a relative value basis.