AMP (ASX: AMP) has released its second AMP Capital Institution Investor Report, which includes results of a survey of 65 senior decision makers from large financial institutions around the globe. Collectively these institutions manage an estimated US$2.1 trillion.
Amongst the key findings, according to Anthony Fasso from AMP Capital, the survey found that “investors are favouring investments that offer value, potential for capital growth and predictable, consistent yields as global economies continue to improve. As such, they are allocating more to alternatives and, in particular, real assets. One appeal of real assets is their tangibility, which offers greater stability and insulation from the risk of public equity markets.”
The prospect of the US Federal Reserve tapering its bond buying and the potential for higher interest rates in both the US and Europe appears to be a major factor in the investment decisions of these influential decision makers. This is leading to investors reducing their fixed income holdings — particularly to government and investment grade corporate bonds — with the cash to be redeployed into harder assets such as real estate and infrastructure.
European financial institutions are the most keen to increase their allocations to direct real estate investments, followed by Asian and then North American institutions. After real estate, unlisted infrastructure is also in hot demand with 20% of all institutions surveyed expecting to increase their allocation to this asset group.
The findings of AMP’s survey bode well for a number of Australian companies that could gain from an increase in global asset allocation to real estate and infrastructure assets. Macquarie Group (ASX: MQG) is very active in both these spaces and thanks to office representation in many of the global financial hubs it can actively pursue investment mandates. Likewise through its subsidiary Hastings Funds Management, which is a leading fund manager of alternative assets specialising in the acquisition and management of infrastructure, property, alternative debt and private equity, Westpac (ASX: WBC) is also well positioned to win investment mandates too.
Just because the ‘big’ money is doing something doesn’t mean smaller investors need to follow. However smaller, more nimble investors can position themselves to profit from asset allocation decisions of large financial institutional. As cash is redeployed from bonds into more productive assets, institutional investors will require the services of certain firms and be chasing certain asset types.
To use a famous investment analogy savvy investors will look ahead and not skate towards the puck, but rather skate to where the puck is going!
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Motley Fool contributor Tim McArthur owns shares in Macquarie Group.