Preqin: Alternative assets in Europe will continue to grow; Western Europe overtakes UK as largest manager base

Assets invested in European alternatives have almost doubled in the past seven years and will continue to grow, according to a Preqin report published on September 9.

The 2022 report also found that Western Europe overtook the UK as the largest manager base for these assets.

At end-December 2021, assets under management by Europe-focused private equity funds stood at 2.2 trillion euros ($2.5 trillion), up from 1.3 trillion euros in December 2015, Preqin said. . By the end of 2026, private fixed assets in Europe could reach €4.9 trillion, a compound annual growth rate of 14% since 2021.

Infrastructure and private debt in Europe are expected to experience the strongest growth in overall assets under management between 2021 and 2026, with compound annual growth rates of 24% and 19%, respectively, Preqin said.

Private equity is expected to remain the largest asset class, reaching 43% of private capital in Europe in 2026, and infrastructure assets could overtake real estate assets around 2025, according to Preqin forecasts. Real estate assets as of June 30 amounted to 101 billion euros, while infrastructure totaled 77 billion euros.

The report cited the strong performance of private equity assets after the global financial crisis which attracted new investors, and new opportunities created by the pandemic when a strong V-shaped rebound boosted the performance of older vintage funds.

Falling interest rates throughout the pandemic have pushed equity valuations to historically high levels in Europe, according to the report. While venture capital funds have continued to show a high internal rate of return since then, private equity fundraising through June 2022 was only €34 billion raised, compared to €136 billion. euros in 2021.

The UK’s dominance changed at the end of 2020, when Western Europe overtook it in terms of assets under management in all private capital asset classes except private debt and hedge funds, according to the report.

The UK has also lost its dominance in terms of locating funds. While in 2010 the UK and Luxembourg were home to 41% and 15% of Europe-focused fund capital respectively, the proportion is now 16% and 46%, according to the report.

Mary I. Bruner