In an environment that is increasingly uncertain, institutional investors are using real estate to manage volatility and protect against rising inflation. In essence, therefore, these institutional investors are using real estate as a proxy for bonds.
In Europe and the U.K., real estate allocations remain on the rise, with institutional investors raising their allocation to real estate to 10.9% on average, according to data from London-based research firm Preqin in a Pensions & Investments article.
Pension funds in the U.S. are also allocating investment dollars to real estate. Since the Brexit vote, the $299.5 billion California Public Employees’ Retirement System, the $9.5 billion Public School Teachers’ Pension & Retirement Fund of Chicago, and the $15.5 billion Illinois State Board of Investment announced searches for real estate managers, according to Pensions & Investments reports.
Non-institutional investors, therefore, should be paying attentions to the large institutional investors, and take advantage of investing in real estate to manage volatility and protect against inflation. So, we want to explore the research in this article by Paulina Pielichata in Pensions & Investments, while also giving insights as a Florida-based real estate wholesaler.
Investors Increasing Real Estate Allocations
In an increasingly volatile market, investors are looking to protect their assets while also earning a reasonable profit. As the average gilt rate in the UK hovers around .5%, and the 10-year United States Treasury offers a 2.3% return, investors are choosing to move away from bonds. These investors view real estate as an innovative way to realize higher returns, while also providing a degree of protection for their overall portfolio.
A major example of this shift in investments is coming from Switzerland. The Swiss Federal Pension Fund PUBLICA, managed by David Engel, recently approved a strategic asset allocation of 4% to invest in real estate funds. According to Mr. Engel, the plan will span three to four years.
Part of this shift in allocations is due to the recent Brexit vote that stands to change the landscape of the entire European Union and its negotiations. Initially, the Brexit vote was a source of anxiety for many in terms of real estate growth. However, the demand for real estate began to pick up again in the third quarter, showing that investors still have a healthy appetite for low-risk investment options in the U.K., while demand in the United States remains strong.
As a result of low bond yields, and the stability of real estate to manage volatility and hedge against inflation, institutional investors are raising allocations for real estate, shifting from shorter-term investments to longer-term investments.
The global trend toward higher real estate allocations is also present in the U.S., with conservative institutional investors continuing to rely on real estate to produce good returns while providing security to their overall portfolios.
To read more about the global trend toward real estate investments, we recommend: Real estate allocations up as investors seek security.
Graystone Investment Group
Graystone Investment Group is an experienced Investment Group, helping clients generate profits with real estate investments that can help to manage volatility and protect against inflation.
Unlike other wholesaling groups, we find properties that we resell to investors at discount prices, while also connecting them with private financing. We also coordinate with rehab and management companies we’ve worked with for years, at no extra charge.