Pension investment in long income property to increase - Alpha

Investors are expecting an increase in the level of investment from pension funds in long income property over the next two years, research from Alpha has revealed.

Its survey found that 84 per cent of professional investors believed that investments in real estate let on long leases would rise.

Furthermore, one if five (20 per cent) anticipated a “dramatic” increase.

Alpha described long income property as “real estate let on long leases where the covenant strength and/or property income over-collateralisation offer defensive value characteristics for investors”.

When asked the benefits of investing in long income property to schemes and investors, 80 per cent of respondents highlighted income security as a ‘top three’ benefit.

Additionally, 80 per cent cited inflation protection as one of its top three benefits.

Commenting on the findings, Alpha partner and head of long income, Hugo James, said: “With many nominal yields - especially in northern Europe – currently negative and forecast to rise only gradually in the longer term, the secure income derived from long income property makes it an increasingly attractive asset class for pension funds and insurers.

“Our research suggests that they will increase their allocation to this asset class, and this will also be helped by more long income property assets coming on to the market over the next few years.”

Alpha’s research found that 94 per cent of professional investors either ‘strongly agree’ or ‘agree’ with the theory that a combination of low European government and corporate bond yields, and an uncertain macroeconomic environment, have led institutional investors to increasingly seek alternative sources of long-dated secure income such as long income property, to meet their liabilities.

    Share Story:

Recent Stories

Addressing climate change risk in fixed income portfolios
Francesca Fabrizi meets Lee Clements, director of SRI research at FTSE Russell, to discuss climate change risk in investment portfolios

The modern age
Deputy editor Natalie Tuck chats to the ABI’s Yvonne Braun about her work at the ABI and her thoughts on key pension topics