Preqin, the global leader in alternative assets data, analytics, and insights, is pleased to announce the launch of its 2021 Alternative Assets in Europe Report, produced with leading European asset manager Amundi for the fourth year in a row. Preqin and Amundi share a common vision of providing the investor community with authoritative data, transparency, and standardization for private markets to support their growth. This report – the largest study of its kind – looks at how the industry has developed in the main sectors and asset classes, exploring current trends across 13 key European markets, with in-depth coverage on 6 leading markets.
Preqin and Amundi also announce that for the first time, the report will introduce Leagues Tables,
ranking European-domiciled alternative fund managers regardless of fund structure or capital source, in order to provide the investor community with a comprehensive overview of the state of play of alternative assets in Europe. See below to view the five league tables by assets under management (AUM).
“We are ready to see Europe’s economies reach new records in 2021, optimistic that they are on the road to recovery following the pain of the pandemic. Our discussions with Europe-focussed investors confirm that they are ‘sticking with the program’ as regards their allocations to alternative assets: faced with uncertainty and diminished returns across all asset classes, the attractions of alternative assets—including innovative green investment opportunities—remain compelling.”Mark O’Hare, Founder and CEO of Preqin
“Real assets will be the winning bet for a post-COVID world. Most notably, a new post-COVID cycle could see a resurgence of inflation and continue to drive capital towards these asset classes which offer protection against inflation and the prospect of higher returns. Real assets can help to meet the economic challenges posed by the COVID recovery and fulfil investor expectations on both performance and impact, notably by helping allocate capital towards the energy transition. As such it is crucial to make real assets accessible to a wider range of savers.”Dominique Carrel-Billiard, Global Head of Real Assets at Amundi
Growth of the European Alternatives Industry
Europe-based alternative asset fund managers now hold €2.06tn in assets under management (AUM) as of December 2020, up from €1.81tn a year ago—an increase of over 13%—and are on track to make 2021 a record year for fundraising. AUM had grown by 59% over the five years from December 2016 to December 2020, and Europe now accounts for 24% of the global alternative assets industry.
Fundraising, investment, and performance have accelerated in H1 2021. Fundraising by Europe-based private capital GPs in H1 2021 reached 59% of 2020’s full-year total, which, despite the practical challenges caused by travel and meeting restrictions, was the second-highest on record. Investment teams have been busy, with the value of private capital transactions closed in H1 2021 already at 83% of 2020’s full-year total, with venture capital, infrastructure, and private equity the most active sectors.
Strong equity and debt capital markets since Q2 2020 have translated into a buoyant exit market, not just for IPOs, but also for trade sales and refinancing. While return data in the early years of limited partnership funds is only an indicator of future performance, median net IRRs1 for 2018 vintage private equity and venture capital (PEVC) funds stand at 22.0%, while vintages 2011-2017 have been lifted to between 14.0% and 19.4%. Those appealing performance prospects should attract even more investor capital into European alternative assets going forward.
Maturing of UK Alternatives allows Other Key European Markets to Catch Up
The UK has long been the largest European market for the management of alternative investments. As asset classes have expanded and globalized, the share of AUM managed by UK-based GPs has reduced. Between 2010 and 2020, private capital assets managed out of Europe increased by 209%, while AUM at UK-based managers increased 177%, with the UK’s share of European private capital AUM falling from 59% to 52%.
AUM growth at UK-based PEVC managers has averaged 13% over the past three years. This is significantly slower than the 23% notched up by managers in France, but the UK’s PEVC AUM is still 4.6x greater than that of France (€473bn vs. €102bn). Further country highlights for the UK, France, Germany, Italy, Switzerland, and Luxembourg can be found below.
Investment Driven by Infrastructure and Real Assets
Infrastructure has been a bright spot as governments across Europe are pushing investments as a way of stimulating economic growth and meeting carbon reduction targets, while increased public debt levels as a result of COVID-19 will increase demand for private capital. Europe-based infrastructure AUM has grown remarkably over the past five years, reaching almost €250bn as of December 2020— a CAGR of 22% since 2015. With the current Europe-focussed infrastructure dry powder of €130bn making up a remarkable 43% of the infrastructure dry powder globally, investment activity is set to heat up further.
Real estate investment in H1 2021, as measured by the number of deals, is tracking at a similar pace to 2020. H1 2021 saw deal numbers at 54% of 2020’s total, which itself was down substantially on 2019. The pandemic did not trigger a widespread correction in real estate valuations—evidenced by a 9% increase in real estate AUM to €177bn over 2020, despite lacklustre fundraising.
Hedge Funds Back in Favour
In a challenging year for markets globally, European-focussed hedge funds finished the year positively in 2020, up 7.04% on average, with the momentum continuing into 2021. After experiencing record outflows of -€31.8bn in Q1 2020 amid the equity market sell off, hedge funds stabilized, and then attracted capital through the second half, with the €32.2bn net inflows representing a turnaround for an asset class that has experienced consistent outflows over the past five years of bull market conditions. As Europe slowly comes out of its prolonged recession, hedge funds are best positioned to benefit from an expected increase in volatility in the market.
ESG Moving from Firm to Investment Strategy
Commitment to ESG principles and compliance with EU legislation are the norm for fund managers and investors in Europe, with more than 80% of AUM in ESG-committed funds. Environmental issues are also driving opportunities across alternative asset classes. In real estate, for example, there is increased emphasis on value added strategies, which raised €11.7bn in 2020, many of which focus on creating value by reducing buildings’ carbon emissions. In private equity, investors are increasingly using an ESG lens to create KPIs in areas such as supply chains that will drive increases in valuations on exit, while infrastructure investment—led by governments in order to meet carbon reduction targets—is also increasingly important for the energy transition, notably in renewable energies.