Investments in Real Assets Surge Among U.S. Institutions

In an effort to diversify their portfolios, institutions are making sizable investments in real assets and are planning to increase their level of activity next year, according to a Greenwich Associates report.

Data from Real Assets: An Increasingly Central Role in Institutional Portfolios reveals that a majority of institutions active in real assets have target allocations in the realm of 10% of total portfolio assets. Approximately one in five institutions will increase their target allocations from current levels as a part of changes in their investment strategy, while a similar number will begin using new categories of real assets for the first time.

When investing in these private and listed real assets, including real estate, infrastructure, farmland, timber and precious metals, institutions value the expertise of their asset managers. Their reliance on expertise reflects institutions’ unfamiliarity with real assets and the complexity associated with the investments.

“The experiences of institutions with significant investments in real assets strongly suggest that institutional investors will be more satisfied with their results if they invest with managers with high levels of demonstrated expertise,” says Andrew McCollum, Greenwich Associates consultant. “In many cases, these will be specialist managers with long track records in specific real-asset categories.”