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Posted on June 3, 2015
Public sector asset managers around the world led by sovereign funds and public sector pension funds have been moving aggressively into real estate and infrastructure to offset low returns on traditional markets. That is among the findings of Global Public Investor (GPI) 2015 – Real Assets for the Real Economy, a survey of US$ 29.7 trillion worth of investments held by 500 public sector institutions in 180 countries, launched on 21/05 in Beijing.
Using results from the Official Monetary and Financial Institutions Forum (OMFIF) Global Public Investors survey carried out in November 2014, there are estimates that 9.1% of total assets held by the 500 GPIs are in real estate and infrastructure, a total of US$2.7 trillion. Asked about future investments, 44% of sovereign funds and public pension funds stated they would be increasing their real estate and infrastructure holdings in the next three to five years, a greater amount than for any other asset class, while 50% will maintain holdings at current levels. Only 6% stated they would be lowering their allocations here.
The survey highlights expectations that asset price bubbles have been building up in sections of the capital markets as a result of central banks’ quantitative easing, particularly in Europe. These risks may now be spreading to real estate and infrastructure investment, which the report terms as ‘just one of the potential headaches facing the GPIs.’
The leading 10 GPIs in the top 500 are largely unchanged over the year, led by the top four, People’s Bank of China, the Japanese Ministry of Finance and Bank of Japan, Japan’s Government Pension Investment Fund and Norges Bank Investment Management. Italy’s Cassa Depositi e Prestiti replaced the Central Bank of the Russian Federation at No. 10 in the list, after Russia depleted reserves last year to help brake the ruble’s fall.