New Greenwich Report Projects Continued Growth in Institutional Investment in Both Private and Listed Real Asset Categories

U.S. institutions are increasing their investments in real assets like real estate, infrastructure, farmland, timber, and precious metals, according to a new study from Greenwich Associates and Cohen & Steers, a leading global asset manager focused on real assets.

Real assets are playing an increasingly important role in institutional investment strategies as investors look to diversify their portfolios and secure new sources of hard-to-achieve returns. The new Greenwich Associates report, Real Assets: An Increasingly Central Role in Institutional Portfolios, presents the research results of a study conducted with 110 corporate and public pension funds, endowments, foundations, defined contribution plans, and consultants. The report concludes that institutions are making sizable investments in private and listed real assets and are planning to increase their level of activity in the next year.

Continued Growth Projected
A majority of institutions active in real assets have set target allocations in the neighborhood of 10% of total portfolio assets. “More than half the institutions participating in the study are underinvested relative to their targets, but catching up to allocation targets only tells part of the story,” says Greenwich Associates consultant Andrew McCollum.

The data also suggest that approximately 1 in 5 institutions will increase target allocations from current levels as part of changes in investment strategy. A similar number of plans also plan to begin using new categories of real assets for the first time.

A Premium on Manager Expertise
When it comes to investing in real assets, institutions value the expertise of their asset managers to an extent rarely seen in other asset classes. The premium on expertise reflects both institutions’ unfamiliarity with real assets and the inherent complexity associated with these 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 McCollum. “In many cases, these will be specialist managers with long track records in specific real-asset categories.”