Aviva Investors targets GBP10bn of investment into UK infrastructure and real estate in next three years
Aviva Investors, the global asset management business of Aviva, is targeting GBP10 billion of investments into UK infrastructure and real estate projects over the next three years.
In the process, these investments, made on behalf of savers and investors, will support job creation in the infrastructure and real estate industries in cities and regions across the UK. In addition, Aviva Investors expects to direct over GBP3.5 billion into UK structured finance and private corporate debt strategies.
Aviva Investors is already a significant investor in infrastructure and real estate via its GBP47 billion Real Assets business, which targets investment opportunities in both asset classes, as well as private debt and structured finance.
Amanda Blanc, CEO at Aviva plc, says: “Aviva is investing in UK infrastructure and real estate to help our economy and communities bounce back. We plan to invest in the UK’s regions and cities, in critical areas such as social housing, renewable energy and rail networks. The investments being made will ultimately fund people’s savings and retirement, aiming to deliver stable returns to our customers and funding a sustainable future for the UK.”
With the UK facing a sizeable funding shortfall in meeting its infrastructure needs, GBP10 billion of capital will support the development of UK real estate and infrastructure, including renewable energy projects in-line with the government’s long-term commitment to meet net-zero emissions by 2050.
The increase in allocation from institutional investors to real assets comes as interest rates remain low and public markets continue to suffer from heightened volatility and squeezed yields. This has led to assets under management in Aviva Investors’ Real Assets business growing by nearly 28 per cent to GBP47.3 billion since its launch in May 2018.
Almost GBP6.5 billion of commitments will come from Aviva group companies, with the remaining amount expected to come from external client mandates.
Mark Versey, Chief Investment Officer, Real Assets at Aviva Investors, says: “Investors are recognising the enhanced yields they can get from holding real assets compared to the return on a comparable publicly listed security. Being backed by an asset with a tangible value means that they often carry much lower volatility too. The market uncertainty caused by Covid-19 should make the resilience of long-term cashflows offered by real assets increasingly appealing to institutional investors. With interest rates likely to remain lower for longer, we expect clients will continue to look towards the sector for risk diversification and returns.”
In its inaugural Real Assets House View in March, Aviva Investors identified renewable energy as one of the sectors offering greatest long-term relative value. Earlier this year, the business provided financing for the acquisition of the Galloper Wind Farm offshore transmission operator assets, which can produce enough energy to power 380,000 homes. It previously invested GBP400 million in 2018 towards the construction of Hornsea 1, the world’s largest offshore windfarm, which generates enough electricity to supply over one million UK homes.
Aviva Investors recently completed two investments into the UK’s social housing sector, providing financing to Coastal Housing Group and settle housing respectively. The funding will help both housing associations deliver additional housing and advance ESG standards through improved energy efficiency performance.
Aviva Investors is currently undertaking significant development projects across the UK, including two flagship buildings on Liverpool Street and Moorgate in the City of London as part of TfL’s Elizabeth Line project, as well as the redevelopment of Rosebery House in Edinburgh’s Haymarket into one of the most sustainable locations in the city. The business has also made significant investments into Manchester and Cambridge, two cities it believes are particularly well-placed to deliver strong investment performance over the long-term.
Versey adds: “Investing in real assets has an important social and economic benefit; funding everything from new offices and student accommodation to renewable energy facilities and rail infrastructure. They can also deliver better investment outcomes for employee pension schemes and insurers, whilst creating jobs in local communities. As a long-term investor, we recognise the impact we can have, from regeneration work in partnership with local authorities, through to creating renewable energy networks as part of the UK’s sustainable future. It’s important we better-connect investors with the assets they own and demonstrate the value that their investments can have in local communities and society.”