Europe-based alternative asset fund managers now hold €2.06trn in assets under management (AUM) as of December 2020, up from €1.81trn a year ago – an increase of over 13% – and are on track to make 2021 a record year for fundraising, according to research.
Preqin’s 2021 Alternative Assets in Europe Report, published in partnership with Amundi, has revealed that AUM had grown by 59% over the five years from December 2016 to December 2020, with Europe now accounting for 24% of the global alternative assets industry.
Fundraising, investment, and performance have accelerated in H1 2021, the report said, with Europe-based private capital GPs in H1 2021 reaching 59% of 2020’s full-year total, which, despite the practical challenges caused by travel and meeting restrictions, was the second-highest on record.
The research has also shown that 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 as 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, it added.
Infrastructure and real assets
Infrastructure has been a bright spot as governments across Europe push 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 feed a demand for private capital, the study noted.
It showed that Europe-based infrastructure AUM has grown remarkably over the past five years, reaching almost €250bn as of December 2020 – a compound annual growth rate (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, the report said.
Real estate investment in H1 2021, as measured by the number of deals, is tracking at a similar pace to 2020. The first half of the year saw deal numbers at 54% of 2020’s total, which itself was down substantially on 2019.
According to the report, 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.
Dominique Carrel-Billiard, global head of real assets at Amundi, added: “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.”
He added that 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”.
And as such “it is crucial to make real assets accessible to a wider range of savers,” he said.
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, the study said.
After experiencing record outflows of €31.8bn in Q1 2020 amid the equity market sell-off, hedge funds stabilised, 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, according to the research.
As Europe slowly comes out of its prolonged recession, it said, hedge funds are best positioned to benefit from an expected increase in volatility in the market.