Seven in 10 defined contribution (DC) schemes plan to increase allocations to real assets in the next two years, according to new research from Aviva Investors.

The company’s latest Real Assets Study found that 69% of corporate DC schemes planned to increase their allocation to asset classes such as property and infrastructure over the next 24 months. This was up from 51% in the 2023 edition of the study. The survey included schemes from the UK, Europe, Asia Pacific and North America.

According to the research, DC schemes cited capital growth, diversification and capital preservation as the biggest benefits of real assets investing, qualities that Aviva Investors said had been reinforced during 2023 as listed markets experienced significant volatility.

Daniel McHugh, chief investment officer at Aviva Investors, said: “DC pension funds represent an increasingly large portion of the pension market, yet this important group of investors has not been able to access – or allocate to – real assets as they would like, or to the extent that optimises investment outcomes.”

Just over half of DC funds covered by the study only offered access to real assets via their default investment funds. However, 45% said they expected to be able to offer self-select options in real assets in the future.

In the past, many UK DC schemes have been limited in their ability to invest in illiquid asset classes such as direct real estate and infrastructure because of a need for daily liquidity for any investment vehicles used. However, innovations such as the introduction of the long term asset fund (LTAF) structure have improved access to these asset classes.

Access to inflation-linked income may also be driving the rising interest in real assets, according to McHugh.

“While 57% of respondents see diversification as a primary reason for allocating to real assets, this increases to 60% when looking ahead over the next two years,” he said.

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