Global black swan events, generally considered to be once-in-an-economic-cycle occurrences, have been disrupting investment markets with alarming frequency. In the past few years, we have experienced Brexit, the COVID-19 pandemic and geopolitical conflicts. Europe’s surge in inflation was significantly fueled by the economic shockwaves from the Ukraine crisis. The crisis significantly affected global energy and agricultural supply chains, driving up the cost of fuel, gas and essential commodities, which quickly fed through into consumer prices across the continent. In response to this inflationary shock, European central banks implemented a series of aggressive interest rate hikes, shifting from historically low rates to multi-year highs.
Although consumer price growth in many European countries has returned to target levels, 2025 has not been exempt from significant economic shocks. The latest in this series of black swan events was the economic uncertainty that arose from the US government’s tariff policy. Although trade policy negotiations have since evolved and taken positive steps forward, these events continue to remind investors of the importance of allocating to assets with the potential for more stable performance over time, which have historically demonstrated their ability to be an effective partial inflation hedge during inflationary periods.
A decade ago, the lack of institutional investment in alternative sectors was driven by limited scale for investment, but also inadequate performance data to support investment decisions and a lack of knowledge of how these assets perform during difficult economic times. Today, the opposite is true. It is increasingly evident that institutional investors are rotating allocations from commercial sectors towards a wide range of alternative sectors across Europe. These groups have historically been attracted by relative outperformance, favourable demographic tailwinds,lower volatility and less correlation with economic cycles - particularly in a period of current macroeconomic uncertainty. We believe investors’ interest in alternative real estate assets that offer resilience and durable income will accelerate even further in the current economic uncertainty, building on the momentum we have seen during the past decade.
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