Investment Actions

2018 Real assets outlook

Feb 28, 2018
By BlackRock

Capital at risk. All financial investments involve an element of risk. Therefore, the value of the investment and the income from it will vary and the initial investment amount cannot be guaranteed.

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Adapting to a dynamic investment environment

Rising allocations to real assets is happening at a time of flat or falling levels of transaction volumes. The investment environment has become more competitive, elevating prices and making it more difficult to deploy capital. This trend is set to continue as more capital is expected to flow into the asset class. About 60% of the institutional investors surveyed in BlackRock’s 2018 Global Rebalancing Survey indicated that they intend to increase their allocations to real assets this year.

Global capital flows

Global capital flows

Source: BlackRock, using 2012-2017 global deal flow data from Real Capital Analytics (“RCA”) and Dealogic, as at 31st December 2017. RCA global deal flow for income-producing properties excluding land. Dealogic global deal flow data excludes project financings in sectors outside BlackRock’s definition of infrastructure, such as mining, oil and gas exploration, and manufacturing. Q4 2017 data in both data sets are projected based on the previous 5 years run rate. All data are presented in USD. Percentage changes may be affected by currency fluctuation versus the US dollar.

The composition of the underlying performance drivers is evolving, reflecting changing market conditions. Over the past decade, global real assets markets have posted attractive returns, with positive contribution from income growth and the multiple effect. We believe the multiple effect has now paused in many global markets and with returns normalising, investors are left facing a positioning dilemma with regard to future performance.

In our 2018 outlook, we set out how key investment market indicators such as transaction volume and fund flows impact regional real estate and infrastructure investments. We then explain the implications of these developments, and conclude with how investors can navigate markets.

Jim Barry
Global Head of Real Assets
Marcus Sperber
Global Head of Real Estate
Alan Synnott
Global Head of Research & Product Strategy for Real Assets
Steven Cornet
Head of US Research and Strategy for Real Assets