Real assets set for prosperous New Year

Investors in European infrastructure and real estate should be able to access a good pipeline of deals in 2017.

The forecast for real assets going into 2017 is generally good, and investors into Europe are expected to have access to a strong pipeline of deals during the year.

Mariana Enevoldsen and Kevin Smith, directors at Guernsey-based Heritage International Fund Managers, spoke to pfm about what the coming year has in store for the infrastructure and real estate sectors.

Outlook for the infrastructure sector

Infrastructure investment is expected to go from strength to strength because of the strong yields these assets are generating.

“The big players will continue to raise large amounts of capital, and there will be no shortage of pipeline deals,” Enevoldsen said.

“The only potential issue is that infrastructure funds are now trading at premium to their NAV – which may make them less attractive,” she said.

But whether promises to increase infrastructure development on both sides of the Atlantic will materialise is another question.

“The UK chancellor promised to increase spending in the Autumn Statement, as did Trump in his election manifesto. But whether or not these were just headline quotes remains to be seen,” Enevoldsen said.

Outlook for the real estate sector

Which side of the deal pipeline you’re sitting on determines the outlook for the real estate sector, Smith said.

“Buyers will definitely be able to source good deals, and there will be plenty of opportunities to invest. Sellers are likely to contend with lower valuations.”
Investment is expected to remain consistent from Asian investors, particularly in the UK because of the falling value of sterling.

“London remains a focus, as do many German cities. Asian investors in particular tend to take a longer-term view on investments so the opportunities are there for them,” Smith added.

A government decision on EU students will also provide welcome relief to student housing developers, who are now likely to enjoy a second consecutive year of strong investment, while care homes are also likely to become hot property as the continent deals with its aging population.

Heritage is an independent provider of specialist insurance and financial services to global private clients. It has offices in Guernsey, London, Belfast and Malta, and a headcount of more than 150.