What investors are buying amid the coronavirus pandemic

Hotels, pipelines, convenience stores and automaker bonds are among the assets being bought by some of the world's biggest institutional investors as they look for value in a world thrown into turmoil by the coronavirus pandemic.

In interviews with sovereign wealth funds, retirement plans and money managers across Asia-Pacific and Europe that collectively manage about $3.4 trillion, one thing was clear: Many of them are avoiding the overheated stock market.

The most common outlook was one of caution. They are mindful that much of the rebound in markets and private company valuations is thanks to ultra-low interest rates, massive central bank stimulus and government fiscal support, some of which could start to be wound back in coming months.

With asset values still seen as inflated, even in some hot areas like health care and technology, many are waiting for a potential second downturn after stimulus measures end but before mass vaccinations enable economies to restart without risking widespread infection.

GIC, Singapore's sovereign wealth fund, is looking at "less loved" areas from retailing to infrastructure, whose valuations have been pummeled by the pandemic, CEO Lim Chow Kiat said when the firm released its annual review in late July.

The fund only officially discloses it manages more than $100 billion but has more like $450 billion, according to the Sovereign Wealth Fund Institute, making it the sixth-biggest in the world.

In two of its largest deals this year, it was part of a group that acquired a 49% stake in ADNOC Gas Pipelines for $10.1 billion, and last month teamed with Australian property group Charter Hall in a A$682 million ($500 million) acquisition of more than 200 convenience stores attached to gas stations.

CIO Jeffrey Jaensubhakij said even areas like hospitality could bounce back before global travel resumes. "Once you've contained the virus, domestic travel can come back even if international travel can't," he said. "Then there might be opportunities in the hotel space where domestic travel could continue to grow and take up a fair amount of demand."

Global border closures can only be temporary, and trade is slowly recovering, said Didier Borowski, head of global views at Amundi, Europe's largest money manager, which oversees the equivalent of about $1.9 trillion.

However, he predicts pharmaceutical and health industries will relocate production of some key goods to avoid being dependent on one country. But even then, Mr. Borowski said it would be too expensive and not cost efficient to bring it all home.

"This is the end of unbridled globalization, not the end of globalization," he said in an interview earlier this month.

Bonds are one of the great unloved assets of the COVID-19 crisis, said Andrew McCaffery, global CIO at Fidelity International, which manages about $437 billion.

Carmaker bonds are particularly attractive as auto production picks up, and more people drive to avoid crowded public transport, he said in an interview earlier this month.

"If you look at credit spreads, they've moved to levels that make the bonds of some global carmakers relatively attractive," he said, citing Ford Motor Co. and Nissan Motor Co. as examples. "These bonds are unloved, especially when you consider there's been an increase in car usage versus public transport."

During the pandemic sell-off and rebound, AustralianSuper, Melbourne, the nation's biggest superannuation fund with the equivalent of about $133 billion, kept more than half its portfolio in Australian and global stocks and reduced holdings of real estate, credit and private equity.

Now it's hunting for digital, transport and social infrastructure investments as governments pump-prime economies, CIO Mark Delaney said last week. The firm is also looking for more renewable energy opportunities like last year's $300 million deal with Quinbrook Infrastructure Partners as governments consider a green rebound.

"Clearly doing more around the environment will be a really great long-term outcome," he said. "Given governments are prepared to spend more and be more proactive around the economy, they'll probably be far more proactive around the environment as well."

With a mandate to maximize long-term returns, Melbourne-based Future Fund, Australia's sovereign wealth fund, is keeping its powder dry, CEO Raphael Arndt said at its annual portfolio update earlier this month. The $118 billion fund is positioned cautiously with no pressure to deploy its liquidity "unless and until the opportunities arise," he said.

"Economies right around the world are in their worst recessions for many, many decades, and if you look at the price of assets, they haven't moved much," he said. "The question investors have to ask is: does that make sense? The only way it makes sense is if interest rates stay very close to zero and stimulus stays for a very, very long time — and there's got to be risks to that. That's why we think we're much better positioned in a cautious way right now."

While China was the first to be hit by the coronavirus, it is now leading the way out, making it an attractive proposition for Singapore's state investor Temasek.

The firm, which oversees the equivalent of about $225 billion, is positive about several key themes in China, including consumer technology, life sciences, biotechnology, and fintech, Chief Investment Strategist Rohit Sipahimalan said at the firm's annual review earlier this month.

"This year probably China will be the only large economy with positive GDP growth," he said.