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Institutional investors keen on real assets, but wary of significant rate hike: survey

Friday, January 2, 2015 - 12:05
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A Blackrock survey on Friday showed that institutional investors are turning to real assets to boost investment returns and manage macro-environment risks, but they would rethink allocations if interest rates rose significantly.

A BLACKROCK survey on Friday showed that institutional investors are turning to real assets to boost investment returns and manage macro-environment risks, but they would rethink allocations if interest rates rose significantly.

BlackRock, in a September survey done through the Economist Intelligence Unit, polled 201 executives from institutional investment organisations in 30 countries. Of these, 40 per cent were from North America and 20 per cent from Asia-Pacific. About one-third of the organisations represented in the survey have assets under management of more than US$75 billion.

The survey found that 46 per cent of respondents had increased allocations to real estate, infrastructure, commodities, timber and farmland in the past three years, while 60 per cent expect to do so in the next 18 months.

But almost two-thirds of them said they would rethink some of their allocations to real assets if a "significant" rise in interest rates were to occur.

"According to the survey results, the main draw of real assets generally, and property in particular, has been the ability to provide a stable income in this ultra-low yield environment," Marcus Sperber, global head of BlackRock Real Estate, said. "Investors are becoming increasingly concerned about the impact of central bank policies and the subsequent impact on interest rates on property markets."