Institutional investors need to take action now to protect their portfolios against future inflation risk, according to AEW.
High inflation may seem like a distant prospect, but it is emerging as a growing concern for investors, according to survey results released today by AEW at panel debate co-hosted by Natixis Global Asset Management.
More than 60% of pension fund managers say that inflation worries have risen in importance, according to the research, and property and infrastructure are seen to provide the best hedge.
Within the real estate asset class, respondents rated London offices as providing a “poor” hedge against inflation, but believed that alternative assets such as healthcare and student housing were emerging as more attractive options for balancing portfolios.
“Investors need to do the work to build attractive portfolios now, before higher inflation becomes an issue,” said Mahdi Mokrane, head of research at AEW Europe.
Richard Tanner, chief executive of AEW UK, said: “Retail responds relatively well to inflation, while offices are less linked to RPI and react more to other factors such as shifts in the labour market. The rate of obsolescence in London offices also means that they are not always the best option for fund managers looking for long-dated exposure.”
The survey, carried out in September and October 2011, was based on 42 responses of pension fund managers with assets in the UK and was supplemented by a new round of responses from delegates at today’s panel debate.
Listen to the full interview Real Estate – the best insurance against inflation risk? below. Alternatively, download it here or head to Estates Gazette’s iTunes channel.
sophia.furber@estatesgazette.com
