European insurers are leading the charge for alternative income assets, with pension funds following suit in both Continental Europe and the UK.
Research shows that European insurance portfolios will see their share of alternative income assets rising to 9.2% – a rise of 40% from the current level.
Alternative income includes infrastructure debt and equity, structured finance, real estate finance, and private corporate debt. The latter asset class is the most popular amongst investors who already allocate to the alternative income sector.
Downside protection, diversification and the ‘illiquidity premia’ were cited as the main drivers following the Aviva Investors research of 250 pension funds and insurers in the UK and Europe.
UK pension funds were planning the largest increase – 51%, which would bring their exposure to 6.5% in total.
Mark Versey, chief investment officer for real assets at Aviva Investors, said the appeal of alternative income assets had grown significantly over the past decade and he related future growth to the end of quantitative easing.
“As the era of quantitative easing finally winds down and interest rates rise, the survey highlights that investors are venturing into new sectors and geographies. This has also been borne out in our conversations with clients,” he said.
A similar appetite for alternative income assets was detected by NN Investment Partners earlier this year, with a number of institutional investors saying they would either start investing in the asset class for the first time, or increase their existing holdings.
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