Investor views of some alternative investments altered by the COVID-19 crisis and persistent low interest rates appear to have affected the holdings of the 200 largest retirement plans in Pensions & Investments' annual survey.
Aside from private credit assets, which nearly doubled in the 12 months ended Sept. 30, the asset class with the largest increase was infrastructure, up 21.5% to $41.3 billion.
But compared to infrastructure, other real asset sectors languished, with real estate equity eking out a 4% increase to $369 billion, real estate investment trusts down 19.8% to $28 billion, and energy dropping 21.8% to $24.1 billion.
"Clients swapped out listed infrastructure or REITs for something more direct in nature such as infrastructure," said John Delaney, Philadelphia-based senior director, investments at Willis Towers Watson PLC.
However, when viewed over longer time horizons, both real estate sectors witnessed big increases, but not as much as infrastructure. Real estate assets of the top 200 retirement plans are up 22.7% over the five-year period and 119.6% over the 10 years ended Sept. 30. REITs are up 19.7% for the five years and up 24.4% over the 10-year period. Infrastructure rose 147.3% for the five years and 709.8% for the 10 years ended Sept. 30, from a base of only $5.1 billion in 2010.
Institutional investors were especially interested with infrastructure with a green or environmental, social and corporate governance tilt, Mr. Delaney said.
At the same time, there was a lot of concern among investors about the future of real estate, he said.
REITs are publicly traded and easily accessible and were a place where investors could get liquidity in the first half of 2020, he said.
"REITs probably sold potentially more than they should have," Mr. Delaney said. But the price movement indicated investors expected a "pretty dire future for REITs going forward," he said.
In the year ended Sept. 30, the FTSE Nareit All REITs return was -13.3% and the FTSE Nareit All Equity REITs was -12.15%.