Corporate overview
Aviva Investors is a global asset manager with a broad range of expertise across asset classes. Our investment services include Fixed Income, Equities, Multi Asset & Macro, and Private Markets. Our investment desks share a common investment goal which is to deliver the specific and meaningful outcomes that matter most to today’s investor. We focus on what we do best, and on capabilities and propositions that build on our heritage in managing long-term savings. We manage over €276bn across a range of asset classes (as at 30 June 2024). This gives us the size and scale to successfully seek out opportunities that will deliver specific investor outcomes. With over €49bn of private market assets, €29.5bn of which is invested in real estate (as at 30 June 2024), Aviva Investors offers comprehensive market coverage with specialist teams covering occupational and investment markets, and our dedicated in-house real estate strategy and research teams undertake proprietary research. Capturing and releasing value requires a deep understanding of the market, together with execution capability and agility. Our real estate team is resourced and structured to do that. As at 30 June 2024, we have over 140 real asset investment professionals, based in offices in Frankfurt, London and Paris.
Sector forecasts
INDUSTRIAL: In 2024, our focus is on Pan-European and UK logistics due to the exceptional value we’ve identified in this sector for our clients, which should also benefit from favourable longer-term megatrends, such as continued strong appetite for e-commerce and rising demand for on-shoring warehouse facilities. Occupier demand remains and long-term industrial fundamentals are strong, we expect leasing tensions and rental growth to persist across most European Logistics markets. The gap between UK industrial/logistics rental growth and other European markets expected to close as they accelerate.
OFFICE: The market is experiencing localised pressures, with certain sectors and assets facing more significant challenges. Unlike the global financial crisis, the current pressures are not uniform across the market but concentrated in certain sectors and more acute where assets have significant capital expenditure needs or weak investor appetite. Prime UK office spaces in London continue to show resilience, with a positive outlook for capital value recovery and strong rental growth. There are greater concerns in other office markets, however, such as Germany.
RESIDENTIAL: In the UK, the market has been adopting a cautious stance, anticipating the onset of a rate-cutting cycle. This has contributed to a lack of activity. Prospective sellers, in particular, have been hesitating to move forward with deals. Bid-price spreads are narrowing, and we expect to see the market dynamic and investor profile change when the expected rate cuts begin.
One sector to watch closely is residential real estate, especially single-family housing. Market conditions were supportive in 2023 as debt-backed buyers retrenched from the market, mortgages became unaffordable, taxation changes interrupted supply and housebuilders sought more partnership deals. We took advantage of this market, deploying £500m into 1,300 homes across a number of transactions in the UK. The market dynamic is expected to change as debt becomes accretive (ie, adds value) again but our sustained engagement with programmatic partners and builders over three years places us in a strong position to navigate any impact on pipeline and a more competitive marketplace.
RETAIL: Real estate transaction pricing is bottoming out across Europe, market pricing is flatlining after material market adjustments with prices improving in retail, although likelihood for income growth remains low. The biggest drop in rental collections is coming from retailers who are carefully managing cashflows as they navigate higher costs for products, transport, energy and staff. We also have to factor in that inflation and debt costs are likely to stay higher for longer and there is also a corporation tax rise on the horizon. Accordingly, we have been de-risking by selling out of investments with weaker credits, particularly those entities likely to face headwinds as a result of the current high rate and tax environment. Non-discretionary retail such as food and groceries are a strong defensive asset class against the macroeconomic backdrop.
Investment principles & strategy
Private market assets are inefficient, opaque and highly cyclical. This provides greater scope than any other asset class for price to diverge significantly from value. Unlike in public markets, this can persist long enough for expert investors to exploit the market’s complexity and its participants’ likelihood of mispricing an asset, creating attractive investment opportunities.
We apply a disciplined approach to investing only where we have an advantage, specifically avoiding opportunities where we do not. We do this by developing deep expertise in a small number of target markets where we have conviction in the long-term, underlying structural drivers. We invest with a clear view of how thematic and structural trends are likely to shape tomorrow’s world. So we ensure that all investments align with our vision of how cities, consumer habits and supply chains are changing, building resilient portfolios by being ahead of demographic, technological and societal trends
Furthermore, we are responsible investors. Having a stake in the strength of the communities where we invest, we constantly seek to embed ESG considerations in every step of our decision making, responsibly reducing the carbon footprint of our assets and helping create better places for people to live, work, play and learn.
Strategic corporate development
Aviva Investors is one of Europe’s largest managers of real assets, with 40 years of experience and over €49bn of real assets, €29.5bn of which is invested in real estate (as at 30 June 2024). Our integrated private markets business brings together real estate, infrastructure and private debt under a single leadership and operating structure. This provides focus, leverages resources and creates a true value-based platform across all private markets. We believe this makes us more responsive in delivering the multi-asset and single strategy solutions our clients demand in the private assets’ universe, ranging from absolute return, growth-oriented strategies through to cashflow and liability matching solutions.
Private markets are a core part of Aviva Investors’ strategy and integral to our growth ambition and in positioning us to meet a growing client need for solutions in this area. With over 140 real assets investment professionals across four locations, our platform has the scale to access the full depth and breadth of realasset markets. This enables us to deploy capital in an efficient and disciplined manner. Our diverse capabilities allow us to deliver the best outcomes for our clients.
Performance verification
We have our own performance measurement team dedicated to producing detailed performance reports. For each mandate, we build bespoke benchmarks that appropriately reflect the investment objective and risk appetite of our clients.
Compliance Statement
Except where stated as otherwise, the source of all information is Aviva Investors Global Services Limited (“Aviva Investors”) as at 30 September 2024. Unless stated otherwise any views, opinions and future returns expressed are those of Aviva Investors and based on Aviva Investors internal forecasts. They should not be viewed as indicating any guarantee of return from an investment managed by Aviva Investors nor as advice of any nature. Some of the information within this document is based upon Aviva Investors estimates. It is not to be relied on by anyone else for the purpose of making investment decisions. In the UK this is issued by Aviva Investors Global Services Limited. Registered in England No. 1151805. Registered Office: 80 Fenchurch Street, London, EC3M 4AE. Authorised and regulated by the Financial Conduct Authority. Firm Reference No. 119178.
