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Pension funds and other institutional investors seek inflation protection through illiquid assets: Aeon Investments

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New global research from Aeon Investments, the London-based credit-focused investment company, finds just over a quarter (26 per cent) will dramatically increase allocations to illiquid assets, while 59 per cent of respondents will increase allocations slightly.

However, 12 per cent of respondents say they will keep allocations the same and just 3 per cent plan to decrease their level of investment in illiquid investments. Respondents say the primary motivation for investing in illiquid markets is the need to protect from macro uncertainty. More than half (52 per cent) of investors say this is the primary motivation for choosing private debt investments, which have strategies that offer a floating rate coupon, offering the potential for a natural hedge against inflation.

More than one-quarter (29 per cent) of investors say the most important feature of private debt assets is that they offer diversification benefits. One in ten respondents identified the expanding range of assets offered within private debt strategies as the key motivation for investing. The same number say the increased focus on ESG from the private debt markets is the most important reason behind more professional investors increasing their allocation to private debt.

Within illiquid assets, most investors (80 per cent) favour increasing allocations to residential real estate with 43 per cent expecting to make dramatic increases. Commercial real estate was also seen as a growing area of interest for 81 per cent of respondents, with 28 per cent saying they would increase allocations dramatically.

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